Spinning Contingency Reserve: Economic Value and Demand Functions

Spinning contingency reserve is idle capacity connected to the system to ensure reliable operations in the case of equipment outages. The reserve has an economic value since it reduces the outage costs. In several electricity markets, reserve demand functions have been implemented to take into account the value of reserve in the market clearing process. These often take the form of a step-down function at the reserve requirement level, and as such they may not appropriately represent the reserve value. The value of spinning contingency reserve is impacted by the reliability and dynamic characteristics of system components, the system operation policies, and the economic aspects such as the risk preferences of the demand. In this paper, we take into account these aspects to approximate the reserve value and construct reserve demand functions. The results are obtained in closed form. Illustrative examples show that the demand functions constructed have similarities with those implemented in some markets.