Differences in locational marginal prices: Deterministic vs. stochastic market formulations

Participants in electric energy markets are affected by locational marginal prices that are derived from the day-ahead market's security constrained unit commitment (SCUC) model. Today, the SCUC model utilized in electric energy markets is deterministic and incorporates several approximations. Operators at times are required to modify the deterministic SCUC solution to satisfy all operating and reliability criteria. Thus, the prices derived from the deterministic SCUC model, which do not include the modifications, are inefficient. This study demonstrates a stark difference in market settlements and prices of delivering energy when comparing a deterministic SCUC solution and stochastic (extensive-form) SCUC solution. Even though the stochastic SCUC solution produces more efficient prices and meets all reliability criteria, it currently cannot be used for the day-ahead market due to time constraints. Therefore, electric energy markets still utilize deterministic SCUC models. However, the stochastic SCUC model can be utilized as a benchmark to assess the efficiency an operator's deterministic SCUC.