Patent ID: 7359878

Claim:
A computer readable medium containing program instructions recorded therein, which, when executed by a computer, causing the computer to implement a two-settlement pricing method for determining optimal balancing energy prices for instructed and uninstructed power deviations by market participants including generating participants and load participants having respective maximum balancing energy limits and minimum balancing energy limits in a balancing energy trading market, comprising: receiving bids for balancing energy generation and energy load from the market participants; generating first dispatch instructions for balancing energy to be provided by the respective market participants according to the received bids; collecting, over a predetermined time period, data representing results of the balancing energy provided responsive to the first dispatch instructions, and data representing instructed and uninstructed power deviations provided by the respective market participants responsive to the first dispatch instructions, wherein the instructed power deviations are in compliance with the first dispatch instructions and the uninstructed power deviations are not in compliance with first dispatch instructions; p 1 establishing an allowable bid range for respective market participants responsive to the balancing energy of the collecting step, wherein the establishing is conducted by fixing an upper set point and a lower set point, the upper set point being less than the maximum balancing energy limit, the lower set point being greater than the minimum balancing energy limit; generating second dispatch instructions for balancing energy not to exceed the allowable bid range; generating billing prices for ones of the market participants providing balancing energy responsive to the first dispatch instructions within the the allowable bid range based on a locational marginal price of energy to be dispatched according to the first dispatch instructions; generating billing prices for ones of the market participants providing balancing energy responsive to the first dispatch instructions outside the allowable bid range based on a locational marginal price of energy to be dispatched according to the second dispatch instructions limits; wherein generating the billing prices comprises averaging the balancing energy billing prices according to the relationship: BP m ⁢ ⁢ p T = ∑ ⁢ t ∈ T ⁢ ⁢ ( IncMW t · BP m ⁢ ⁢ p t - DecMW t · BP m ⁢ ⁢ p t ) ∑ ⁢ t ∈ T ⁢ ⁢ (  IncMW t  +  DecMW t  ) , wherein BP mp T is a billing price for market participant mp for time period T; t is a time interval in time period T: IncMW t is an increment balancing energy provided by the mp for time interval t; DecMW t is a decrement balancing energy provided by the mp for time interval t; and BP mp t is a billing price for market participant mp for time interval t; and providing the billing prices to the market participants according to their respective balancing energy provided responsive to the first dispatch instructions.