A mathematical model for electricity scarcity pricing in ERCOT real-time energy-only market

In order to support an appropriate level of resource adequacy in the long term and achieve reliable operations in the short term, a better scarcity pricing design and mechanism will be a key factor for success. This paper proposes an optimization based mathematical model to deduce different items of price adders in scarcity conditions in ERCOT real-time energy-only market. Two successive optimization problems, dispatch correction and extended security-constrained economic dispatch (SCED), are presented. The extended SCED is to minimize the production costs minus the expected social welfare of real-time online/offline reserve capacity associated with construct operating reserve demand curves (ORDC). The derivatives of social welfare is formulated as real-time online reserve price adders. In case studies, we calculate the price adders and compare them with the production results in the ERCOT real-time energy-only market.