Incorporating electricity and fuel spot prices into the stochastic unit commitment

Abstract

The electric power industry is going through deregulation. As a result, the load on the generating units of a utility is becoming increasingly unpredictable. Furthermore, electric utilities may need to buy power or sell their production to a power pool which serves as a spot market for electricity. These trading activities expose utilities to volatile electricity prices. In this paper, we present a stochastic model for the unit commitment that incorporates power trading into the picture. Our model also accounts for fuel prices which may vary with electricity prices and demand. The resulting model is a mixed-integer program which is solved using Lagrangian relaxation. Using this solution approach, we solve problems with 729 demand scenarios on a single processor to within 0.1% of the optimal solution in less than 10 minutes. Our numerical results indicate that significant savings can be achieved when the spot market is entered into the problem and when a stochastic policy is adopted instead of a deterministic one.