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1 A representation of a generic interconnection, with thermal, hydro, and nuclear generation sharing a grid with a winter peaking load.
2 , 93 FERC 61,294, Dec. 15, 2000.
3 For a survey of methods, see J.W. Marangon Lima "Allocation of Transmission Fixed Charges: An Overview,", Vol. 11, No. 3, 1996.
4 Regulation service provides capacity under the grid operator's automatic generation control (AGC), which can respond to incremental or decremental signals in a matter of seconds. Procurement of incremental capacity (Regulation Up) may be separated from the procurement of decremental capacity (Regulation Down), as it is now in California. Payments to generators for the energy delivered by Regulation Up, or by generators for the energy not delivered by Regulation Down, are specified as part of the specific market design.
5 Spinning Reserve represents unloaded capacity that is connected and synchronized to the grid, and that can be dispatched for energy within 10 minutes. In addition to providing backup energy reserves (which allow units providing Regulation Up to be returned to their set points), spinning-reserve capacity provides automatic frequency control to the grid. In the typical case, steam turbines and storage hydro capacity will provide spinning reserves. Rules for dispatching, pricing, and settling the energy capacity of spinning reserves (and for the other reserve ancillary services discussed below) are important elements of the specific market design, with impacts on the broader energy markets.
6 Non-Spinning Reserves represents unloaded capacity that may be connected to the grid, synchronized, and delivers energy within 10 minutes of dispatch. Generation that is eligible to provide spinning reserves (since it is already connected and synchronized) is also eligible to provide non-spinning reserves. Other sources of non-spinning reserves include combustion turbines and other quick-starting facilities, loads that are prepared to curtail within the required time delay, and curtailable ("non-firm") exports to other control areas.
7 Replacement Reserve is technically identical to non-spinning reserves, except that it includes only the capacity that may be connected, synchronized, and loaded within 60 minutes of dispatch instruction. A wider variety of generators and loads are therefore able to provide this service. (Slow-response participants in the other reserve markets also may provide replacement reserves.) Settlement of this reserve recently has changed in the California market: Suppliers of replacement reserves that are dispatched for energy are paid the greater of the energy and the capacity price, but not both.
8 Our market simulation model is based on rational expected equilibrium prices (REEP) in the presence of multiple forward markets. The determination of competitive equilibrium prices in the presence of multiple markets as a non-linear game between the suppliers, who maximize their profits, and buyers, who minimize their payments. Our model, UPLAN, uses a very very large scale linear program (VVLSLP), which alternates between minimizing the buyers' payment and maximizing sellers' marginal revenue in successive iterations until a set of equilibrium prices is reached. The UPLAN Network Power Model uses an optimal power flow (OPF) algorithm to dispatch the resources cleared by the Market Simulation Model to determine the real-time imbalance prices, calculates the security-constrained