Online Electricity Pricing from Frequency Measurements

2026-04-10

AI Summary

This study addresses the sluggish response of existing real-time electricity markets, which struggle to leverage instantaneous active power imbalance information embedded in grid frequency dynamics for efficient pricing. To overcome this limitation, the paper proposes a distributed, PID-type controller based solely on local frequency measurements, directly embedding the price formation mechanism into the frequency response process and thereby coupling market operations with grid dynamics. The approach eliminates the need for centralized dispatch, enabling real-time price signals to be generated online using only local frequency data, which effectively incentivizes and compensates generation units for their frequency regulation services. The resulting integrated market–frequency coupling system significantly enhances the responsiveness and dynamic coordination capability of real-time electricity markets.

Technology Category

• Game Theory and Economic Paradigms: Auctions and Market-Based Systems
• Search and Optimization: Distributed Search
• Multiagent Systems: Mechanism Design

Application Category

• Economics, Online Markets and Human Computation: The sharing economy
• Systems and Infrastructure for Web, Mobile and WoT: Energy management for devices in mobile Web and WoT environments
• Graph Algorithms and Modeling for the Web: Efficient manipulation of static and dynamic Web-related graphs

Abstract

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.

Problem

• online electricity pricing
• frequency dynamics
• real-time market
• power imbalance
• price formation

Innovation

• online electricity pricing
• frequency dynamics
• real-time market
• distributed control
• price formation