Question

Why do ISOs have two auction markets; day a head and real time?

Answer 1

Followings are the reasons for which ISOs have two auction markets:

• Products are focused on guaranteed savings against utility service rates. Higher the number of customers and their demand, then the independent system operator will act as a clearing house between generation and load.
• Day-Ahead and Real-Time auction market requires a necessity of LMP. LMP has been adopted across all deregulated markets and is the primary determinant for settling both energy purchases and sales.
• So that the last bid supply will meet the last unit of demand for LMP. It will control the risk and uncertainties associated with auction market volatility.
• Hence ISO will be able to generate the lowest cost generators based on the required demand producing 24-hours clearing prices. As a result material errors will get reduced.
• Day-Ahead or Real-Time products it is imperative to understand the additional ancillary costs associated with both markets. It is always necessary to have both the markets in place to analyse various costs.

Thus these are the major requirements of two auction markets.

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