Online Electricity Pricing from Frequency Measurements
For power system operators and market designers, this work proposes a novel mechanism to align real-time pricing with frequency dynamics, potentially improving grid stability and market efficiency.
This paper develops an integrated market-frequency dynamics model that enables real-time electricity pricing directly from frequency measurements, deriving a distributed PID-like controller for generators where frequency response is driven and remunerated by prices from local frequency measurements.
Frequency dynamics in power systems reflect active power imbalance in real time, thereby providing an instantaneous signal to inform electricity pricing. However, existing real-time markets operate on much slower timescales and fail to exploit this signal. In this letter, we develop integrated market--frequency dynamics that enable online pricing directly from frequency measurements. Representing the real-time market as a dynamic price-discovery process, and integrating this process with the grid frequency dynamics, we derive an explicit price formation mechanism from frequency measurements. This mechanism manifests as a distributed PID-like controller for each generator, where frequency response is driven and remunerated by electricity prices derived solely from local frequency measurements.