A Basic Study on an Electricity Market Model Integrating the Interaction between Spot and Reserve Market

In power systems, market mechanisms exist to match supply and demand in an economically rational way. However, supply and reserve shortages can occur in situations where the spot and reserve markets coexist. This paper proposes an electricity market model that considers the interaction of the two markets to analyze the impact of market trading on the reliability of operation of the power system. In this model, the decision-making of the reserve provider, who can bid in both markets, is modeled as an optimization problem based on the principle of profit maximization. Market clearing is represented as an optimization problem based on the principle of social surplus maximization. Using the proposed market model, the following phenomena will be analyzed: (1) the output allocation between generation power and reserve determined by the reserve providers base on bidding prices in each market; (2) the impact of the decision-making mechanism on the procurement of supply and reserve power; (3) the influence of the bidding prices in the both markets on the supply and reserve power. Numerical examples demonstrate that certain combinations of prices in the two markets lead to supply and reserve power shortages.