A Fast Algorithm to Calculate LMP Difference Caused by Virtual Bidding in Day-ahead Electricity Market

In two-settlement electricity markets, virtual bidding may significantly influence Locational Marginal Price (LMP) in day-ahead market. An excessive amount of virtual load may cause congestion on certain transmission lines and LMP difference between certain nodes, which may be manipulated by market participants to arbitrage in other derivative markets, such as the Financial Transmission Rights (FTRs) market. For Independent System Operators (ISOs) and regulators, it is vital to calculate LMP difference caused by virtual bidding in advance to monitor market behaviors and to improve market efficiency. However, the conventional enumeration-based method that calculates LMP differences is time-consuming and inaccurate. In this paper, a fast algorithm is proposed to calculate LMP differences using the parametric programming method. Instead of calculating repetitively, the proposed algorithm finds the turning points where LMP differences change. The case study based on a modified IEEE-9 bus system shows that the proposed algorithm outperforms both in efficiency and accuracy.