Convex hull pricing provides a potential solution for reducing out-of-market payments in wholesale electricity markets. This paper revisits the theoretical construct of convex hull pricing and explores its important but underappreciated formulation-dependence property. Namely, convex hull prices may change for different formulations of the same unit commitment problem. After a conceptual exposition of the property, its practical significance is illustrated with two reformulations commonly observed in the market clearing process. Sufficient conditions under which convex hull prices will be preserved by a reformulation are also explored. These findings contribute to a better understanding of convex hull pricing and demonstrate the importance of continued theoretical research into the method.
ISO New England Inc., 1 Sullivan Rd, Holyoke, MA 01040, April/2021