Optimal power flow based spot pricing algorithm via interior point methods: On the economic meanings of λp and λq

Spot pricing is one of the tenets in the restructuring of power industry. The authors briefly review the history of spot pricing theory and interior point methods based optimal power flow, and the advantages of interior point methods as a pricing tool are highlighted. Furthermore, a spot pricing decomposition model is proposed, which could allocate the spot prices of active and reactive power to different ancillary services (spinning reserve, loss compensation, voltage support, congestion management etc.). The implementation of the proposed method is outlined. IEEE 30 bus system is employed to demonstrate the proposed method.