LMP Modeling, Analysis and Forecasting

November 30-Dec 1 | Online

An EUCI Program

Click Here to register $1295(1695 with workshop)

This course examines the value of understanding and forecasting electricity prices in the wholesale markets.  The information will benefit anyone who deals with current and future locational marginal prices (LMPs) in wholesale electric markets by providing a deeper understanding of what drives them: 1) the complexity of supplying electrical energy around the clock 2) across an imperfect transmission grid, 3) from a variety of suppliers 4) without benefit of large-scale storage or rationing.  It addresses itself to wholesale power market participants who confront these questions:

  1. How should I price ‘market risk’ in my proposed project?
  2. Why is my existing project suffering and what can I do about it?
  3. What makes a credible LMP forecast?

The content will cover guidance about forecasting prices – with or without sophisticated modeling tools – in the face of new policies, an evolving resource mix and changing market rules. Emphasis will be placed on describing U.S. locational marginal pricing (LMP) style markets.  Going beyond the traditional three-bus LMP example, attendees will learn how the market forms prices in the real world.  Attendees will become familiar with how this knowledge supports decision-making, trading and negotiation.  Following a review of LMP formation, real-world situations will be dissected using publicly-available data.  Finally, some solved “what-if” examples will illustrate the impact on LMPs of emerging bulk power developments using a simplified market model.  For those attendees who want to understand what some people call “magic”, an optional related workshop is dedicated to exposing the mathematics that solve for “what-if” examples.

Learning Outcomes

Using real-world situations and illustrative examples, this instructional course will:

  • Examine the fundamental drivers of electricity prices (supply, demand and transmission network)
  • Review the value and use of price forecasts for multiple market conditions and products
  • Illustrate locational marginal price (LMP) formation with examples
  • Assess the LMP dynamics of unit commitment – how the market chooses which suppliers to buy from
  • Explain the LMP dynamics of economic dispatch – how the market decides how much to buy from each supplier
  • Identify how different resources are offered into the markets
  • Review input data for fundamentals-based forecasting (market mimicking)
  • Explain the LMP distinctions between modeling “day ahead” (DA) and “real time” (RT) markets



9:00 a.m. – 5:00 p.m.
Course Timing

9:15 – 10:15 a.m. :: Value and Uses of Price Forecasts

  • Impact of market rule changes (loss pricing, extended LMP, subsidies)
  • Evolving resource mix (renewables, storage, coal retirement, etc.)
  • Generation bidding (gas nomination, water release, etc.)
  • ISO transmission plans (Adjusted Production Cost)
  • Elective Transmission Upgrades
  • Generation investment and retirement decisions
  • PPA negotiation (CfD, basis, curtailment, negative LMP risks)
  • Trading (physical, virtual, speculative)
  • Financial Transmission Rights (FTR /TCR / TCC/ CRR)
  • Regulatory & Legislative (Market reform debate)
  • Mark-to-Model

10:15 – 10:30 a.m. :: Electricity Supply, Demand and Transmission Market Basics

  • Day-ahead (DA) markets
  • Real-time (RT) markets
  • Congestion hedging and virtual trading

10:30 – 10:45 a.m. :: Break

10:45 – 11:20 a.m. :: Solving Five Problems Leads to Prices

  • Demand forecasting
  • Unit commitment
  • Economic dispatch
  • Operating reserves
  • Power flow

11:20 a.m. – 12:00 p.m. :: Locational Marginal Prices

  • Marginal energy
  • Marginal loss
  • Marginal congestion
  • Shadow prices
  • Shift factors

12:00 – 12:45 p.m. :: Locational Marginal Prices (cont’d)

12:45 – 1:30 p.m. :: Group Luncheon

1:30 – 3:00 p.m. :: Developing a Realistic Dispatch on a Simple Network

  • Energy and reserves, perfect grid
    • Energy-price hedges
  • Transmission congestion
    • FTRs/CRRs
  • Security constraints (“N-1” on top of “N-0”, “flowgates”)

3:00 – 3:15 p.m. :: Break

3:15 – 4:30 p.m. :: Real World Examples

  • Understanding LMPs through published data
    • California ISO (CAISO)
    • Midcontinent ISO (MISO)
    • Southwest Power Pool (SPP)
    • PJM Interconnection (PJM)
    • New York ISO NYISO)
    • ISO New England (ISO-NE)
    • Electric Reliability Council of Texas (ERCOT)

4:30 – 5:00 p.m. :: Distribution of Homework Assignments

  • Introduction and discussion

5:00 p.m. :: Course Adjoins for Day



9:00 a.m. – 12:15 p.m.
Course Timing

9:00 – 10:00 a.m. :: Dispatch Accounting for Losses

  • Loss factors and the marginal loss component

10:00 – 10:30 a.m. :: Worked Examples Using the Simple Network (solutions only)

  • Impact of higher fuel price (e.g., natural gas)
  • Impact of new transmission build (example: public policy transmission)
  • Virtual bids and offers

 10:30 – 10:45 a.m. :: Morning Break

10:45 – 11:15 a.m. :: Worked Examples (cont’d)

  • Impact of carbon tax
  • Impact of high renewable energy penetration
  • Price spikes and negative prices
  • Extended LMP
    • Block-loaded resources
    • Fast start resources

11:15 – 11:45 a.m. :: Real-World Case Studies

  • Applications of forecasting LMPs

11:45 a.m. – 12:15 p.m. :: Challenges of Forecasting

  • Statistical versus fundamental models
  • What to expect from various assumptions
    • Generation expansion and retirement
    • Fuel prices
    • Transmission constraints
    • Declining demand
    • Incentives
  • Long-term LMP forecasting — fact or fiction?
  • Benchmarking hints
  • Questions to ask consultants!

12:15 p.m. :: Course Adjourns


The Mechanics of Calculating LMPs



This workshop is dedicated to exposing the mathematics for solving “what-if” examples, for those attendees who want to understand what some people call “magic”.  It is complementary to the primary course, converting the principles and practices into specific scenarios.

Workshop attendees are encouraged to have a laptop equipped with the Excel Solver add-in.

Learning Outcomes

Using real-world situations and illustrative examples, this workshop will:

  • Examine the fundamental drivers of electricity prices (supply, demand, transmission network)
  • Review LMP calculation methods
  • Reinforce understanding through experiments using an optimization model

Program Agenda

12:45 – 1:00 p.m. :: Login

1:00 – 4:45 p.m. :: Workshop Timing

  • Unit commitment
  • Co-optimization of energy and reserves
  • Approximate solution by Lagrangian Relaxation
  • Solution by linear programming
  • Interactive model in MS Excel

4:45 p.m. :: Workshop Adjourns