Panel presentation; theoretical and practical considerations in developing and using LMPs

In this presentation the theoretical foundation of the locational marginal prices (LMPs) formulation were given. The decomposition of the LMPs to its various components was discussed in detail and their dependency on the selection of the angler reference, and the system power balance slack were elaborated. The mechanics of calculating LMPs and ASMPs in a practical environment where performance requirements are taxing was also discussed. Emphasis were placed on practical considerations such as the impact of the lumpy generators in computing the LMPs, and various network modeling issues such as, load and generation aggregations, logical generators, losses in non-ISO grid areas, modeling of net-metered generation with auxiliary loads, and modeling of embedded control areas and other special sub-networks. Furthermore, numerical examples was given to provide insights in the mechanics of the LMPs and the ASMPs. Finally, the author briefly touch upon the value of the LMPs on the incentives for investment in facilities for generation and transmission.