Externality Value Based Optimal Pricing Method for Energy and Ancillary Service Markets

The high-proportion integration of renewable energy to power grids puts forward the new requirement for the reserve of power systems, which requires the auxiliary services from the thermal power units to optimize the system operation. However, the widely used marginal price mechanism is difficult to identify the value of externalities of new energy and loads and the value of auxiliary services provided by the thermal power units. Therefore, the Vickey-Clerke-Groves (VCG) mechanism is introduced to quantify the externality value of market members and accurately identify the cost of ancillary services provided by thermal power units based on the substitution benefits. In order to improve the computational efficiency of VCG mechanism, the accelerated algorithm based on the optimal base replacement is proposed, which uses the pairwise simplex method to replace the optimal base based on the initial optimal base, and obtains the optimal solution of the new problem after removing the generator units. The computational results of the IEEE 57-bus system and IEEE 118-bus system cases show that the accelerated algorithm based on the optimal base replacement significantly improves the optimal computational efficiency of the VCG mechanism. © 2022 Automation of Electric Power Systems Press. All rights reserved.