ABSTRACT
The load is served and the system operators of electric grids procure greater amounts of generation capacity than the expected requirement. Most short-term capacity is procured a day in advance when the day-ahead market determines which generators will be online the following day. Capacity procurement is done with a forecast of system conditions the following day. The excess capacity provides insurance against Capacity procurement as well as forecast errors such as higher-than-expected load or lower-than-expected wind power. The excess generation capacity procured in the day-ahead market is collectively referred to here as operational reserves. Since markets are structured differently among regional transmission organizations (RTOs), the use of operational reserves is also different. For example, the Midcontinent Independent System Operator (MISO) procures operating reserves to guard against contingencies in the grid but not to balance load forecast errors. The Electric Reliability Council of Texas (ERCOT), on the other hand, procures operating reserves to cover contingencies as well as load forecast errors.
