Optimization Online


Convex Hull Pricing in Electricity Markets: Formulation, Analysis, and Implementation Challenges

Dane Schiro (dschiro***at***iso-ne.com)
Tongxin Zheng (tzheng***at***iso-ne.com)
Feng Zhao (fzhao***at***iso-ne.com)
Eugene Litvinov (elitvinov***at***iso-ne.com)

Abstract: Recent widespread interest in Convex Hull Pricing has not been accompanied by an equally broad understanding of the method. This paper seeks to narrow the gap between enthusiasm and comprehension. The connection between Convex Hull Pricing and basic electricity market clearing processes is clearly developed, and a new formulation of the pricing problem is presented. From this formulation, several important consequences of the method are derived and discussed. Some counterintuitive properties of Convex Hull Pricing are highlighted and demonstrated with simple examples. It is hoped that this paper will spur additional research on Convex Hull Pricing so that an informed judgment can be made regarding its costs and benefits.

Keywords: Locational marginal pricing (LMP), Pricing algorithm, Uplift allocation, Lagrangian dual problem, Nonconvex optimization

Category 1: Applications -- OR and Management Sciences

Citation: Published in IEEE Transactions on Power Systems: http://ieeexplore.ieee.org/xpl/articleDetails.jsp?reload=true&arnumber=7310885


Entry Submitted: 03/19/2015
Entry Accepted: 03/19/2015
Entry Last Modified: 11/04/2015

Modify/Update this entry

  Visitors Authors More about us Links
  Subscribe, Unsubscribe
Digest Archive
Search, Browse the Repository


Coordinator's Board
Classification Scheme
Give us feedback
Optimization Journals, Sites, Societies
Mathematical Optimization Society