Offline penalty price determination method for transmission thermal constraint relaxations

Jonghwan Kwon, Kory Hedman

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


This paper proposes an offline penalty price determination process for transmission thermal constraint relaxations. System operators utilize various market models, which are highly complex due to operating requirements as well as physical restrictions of assets, to manage electric energy markets while ensuring a reliable supply of electric power. System operators enable constraint relaxations in market models by allowing certain constraints to be relaxed for penalty prices. Constraint relaxation practices help system operators to cope with model infeasibility, obtain possible gains in market surplus, and cap shadow prices. A proper selection of penalty prices is imperative due to the influence that penalty prices have on generation scheduling and market settlement; however, current industry practices do not consider the true cost of the relaxations. This work introduces a systematic methodology to capture the cost of relaxations considering probabilistic weather conditions and associated conductor degradation risk. The numerical analysis evaluates the effectiveness of the proposed method on an electric energy market; the results show that exercising transmission thermal constraint relaxations with a proper selection of penalty prices can provide net benefits to market participants.

Original languageEnglish (US)
Pages (from-to)257-265
Number of pages9
JournalElectric Power Systems Research
StatePublished - Jan 1 2018


  • Electric energy markets
  • Market pricing
  • Operations research
  • Power generation economics
  • Power system economics
  • Power transmission economics

ASJC Scopus subject areas

  • Energy Engineering and Power Technology
  • Electrical and Electronic Engineering


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