Locational marginal capacity pricing for power system resilience

Abstract As the industry shifts towards smarter and greener power systems, enhancing the resilience of power systems against increasingly frequent extreme events has become an urgent priority that requires substantial investment. Therefore, effectively quantifying the value of resilience resources (i.e. the resources contributing to improved resilience) and providing transparent economic signals to incentivize their deployment poses a critical challenge. Inspired by locational marginal pricing for energy and capacity, this study proposes a methodology for locational marginal capacity pricing for power system resilience. We first evaluated power system resilience and generated pricing scenarios using a robust optimization approach. The resulting resilience prices reflect the marginal contribution of the maximum capacity of resilience resources to the overall resilience enhancement. During extreme events, resilient resources receiving revenues are obligated to ensure their availability, whereas customers paying fees gain pre‐event resilience commitments and priority in load restoration. The case studies validate the effectiveness of the proposed resilience pricing, demonstrating its ability to capture node‐specific demands for resilience resources and quantify their value in enhancing system‐wide resilience. Moreover, the resilience price provides a transparent and effective economic signal to guide the optimal location and sizing of resilience resources, as well as inform line hardening and expansion strategies.