Reserve Markets for Power System Reliability

Abstract

Up to this point, we have assumed that a power producer is always capable of producing the power that it sells. Unfortunately, in the real world, mechanical devices sometimes break down, and generators are no exception. It has been remarked that “it is not a question of whether or not a particular piece of equipment will fail, but rather when it will fail” [17]. It is widely observed in electricity restructuring debates that electricity is not storable, and consequently temporary production failures can not be covered by inventory, as is the case with most other commodities. Instead, it is necessary to have generation on the system operating at less than capacity, so that reserve power is readily available in case of a generator or line failure.