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Stability Analysis of Electricity Markets Using

TSK Fuzzy Modeling
Saeed Jafarzadeh, Member, IEEE, M. Sami Fadali, Senior Member, IEEE, and Hanif Livani, Member, IEEE

AbstractThis paper discusses the stability properties of electricity markets and their implications for the deregulated market
environment. We formulate a TakagiSugenoKang (TSK) fuzzy
model for electricity markets to account for their uncertainty and
nonlinearity and obtain realistic stability results. The paper provides sufcient conditions for the stability and instability of electricity markets. All the proposed stability and instability conditions
can be tested using linear matrix inequalities. Simulation results
demonstrate the application of the stability and instability tests
to electric power market under different market conditions. The
tests also demonstrate the importance of the including nonlinearities and uncertainty in the electricity market when investigating
its stability.
Index TermsElectric power market, positive systems, stability,
TakagiSugenoKang (TSK) systems, type-2 fuzzy systems.

I. INTRODUCTION

HE deregulated power market allows market competition

among energy producers to achieve greater efciency
but results in complex nonlinear and uncertain dynamics.
Investigating the stability properties of the market dynamics
requires a mathematical model that accounts for their nonlinearity and uncertainty. The need for a model of the electricity
market has long been recognized [1], [2]. An appropriate
model of the electricity market should be complicated enough
to capture the market dynamics but simple enough to be used
for market analyses. Zheng and Litinov [3] proposed a zonal
reserve modeling method and used it for the New England
independent system operator (ISO). A exible and integrative
method to assess market designs through agent-based modeling
is presented in [4]. A strategic gaming model for analyzing
electricity markets is presented in [5].
Bompard et al. proposed a model for the equilibrium of a
bilateral electricity market based on the concept of a strong
stable network assuming no market intervention [6]. The
market is modeled using a complex bipartite network in which
the nodes are the sellers and buyers in the market and the
weighted links among them represent the bilateral transactions and their amounts. In [7], the equilibrium of an electric

Manuscript received August 20, 2014; revised December 02, 2014; accepted
March 07, 2015. This work was supported in part by the National Science Foundation under Grant IIA-1301726. Paper no. TPWRS-01132-2014.
S. Jafarzadeh is with the Computer and Electrical Engineering Department
and the Computer Science Department, California State University, Bakerseld,
CA 93311 USA (e-mail: sjafarzadeh20@gmail.com).
M. S. Fadali and H. Livani are with the Electrical and Biomedical Engineering
Department, University of Nevada, Reno, NV 89557 USA (e-mail: fadali@unr.
edu, hlivani@ieee.org).
Digital Object Identier 10.1109/TPWRS.2015.2415412

energy market in the presence of renewable energy sources

and demand response. The market response to renewable
energy and demand response uncertainties is analyzed using
perturbation analysis. The equilibriums are derived using KKT
conditions for the perturbed market. Kiani and Annaswamy
[8] developed a dynamic market model that incorporates the
interaction between real-time pricing, physical constraints, and
demand response based loads. The stability of the dynamical
model is investigated and the region of attraction around the
equilibrium is established. In [9], the preliminary results of [7]
are extended to discuss price volatility, physical perception of
all perturbation parameters and effects of network topology on
market stability.
To examine the complicated dynamics of electricity markets,
we need to consider well-known denitions and concepts that
are used to characterize them in the literature. For instance, a
seller's market power is dened as the ability to maintain prices
protably above competitive levels for a signicant period of
time [10]. As another example, it is known that if a supplier
observes a market price above its production cost, it will expand production. Similarly, a consumer with a marginal benet above the market price will increase its demand. Another
example is the supply-demand interaction with price. A higher
gap in supply and demand results in larger changes in market
price. Such statements can only represent market dynamics in
a qualitative manner rather than an exact mathematical description. These linguistic denitions and concepts are well-established for markets and make them a natural application for fuzzy
models [11][13].
Nonlinear models have been proposed to study uncertainties in market volatility. In [14], the stability of a nonlinear
market in the presence of correlation between the stochastic
volatility and the noise sources is investigated. Li and Mei [15],
studied the effects of the delay time on the stability of a nonlinear market model. Their results indicate that there is an optimal delay time which maximally enhances the stability of the
stock price under strong demand elasticity of stock price. Fuzzy
modeling is utilized to model the expected rate of returns in
a probabilistic risk-free investment nancial market [16]. The
proposed method is developed to select the most appropriate
investment under uncertain complex market conditions.
As for any dynamic system, stability is a critical issue for
the electricity market. Alvarado [17] discussed this issue and
investigated the stability of electricity markets under balanced
conditions. Later, Alvarado et al. [18] considered the interconnection of power systems and electricity markets under imbalance conditions. Nutaro and Protopopescu [19] investigated the
effect of a delay in the market clearing signal on the stability

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of electric power markets. These seminal papers made simplifying assumptions including linearity, rst-order dynamics for
supplier and consumer response to price, and negligible transmission losses. These simplications limit the range of applicability of the results. In practice, power systems are known
to have complex nonlinear market dynamics. For instance the
generation cost for diesel generators is nonlinear due to their
heat rate function [20]. Thus, a nonlinear market model and stability analysis are required to obtain more realistic results. In
addition, because of the complexity of the power market and its
components, traditional mathematical models do not provide an
adequate representation of its behavior. For instance, quantities
such as power exchanges, policies, rules and regulations, which
are governed by linguistic variables, are characterized by qualitative knowledge. To exploit such knowledge, one must use
fuzzy models and fuzzy stability analysis, which in turn require
a fuzzy electricity market model.
Fuzzy models are based on rules using linguistic terms instead of mathematical expressions. A fuzzy rule has a linguistic
antecedent and a linguistic or mathematical consequent. The
type of fuzzy rule where only the antecedent is linguistic while
the consequent is a mathematical formula is known as a TSK
rule. A set of TSK rules forms a TSK rule base, which together
with logic for combining the rules to reach a conclusion form
a TSK model. Linguistic terms are characterized by their membership in a fuzzy set. Unlike classical logic where membership in a set is unity for members and zero for others, fuzzy sets
have graded membership levels in the interval
. Such membership functions typically assume exactly known membership
values. In practice, our knowledge of membership function is
often uncertain. A more realistic model of fuzzy sets allows for
uncertainty in the membership functions. Membership functions
with no uncertainty are known as type-1 membership functions
while those with uncertainty are known as type-2. Interest in
type-2 fuzzy sets has grown in recent years because they provide better models for linguistic variables.
This paper provides simple stability and instability tests
for electricity markets based on their TSK type-1 and type-2
models. The stability results include sufcient conditions for
exponential stability and sufcient conditions for instability
that can be tested using LMIs and that were derived by the
authors in [24], [25]. All the results are given for type-2 TSK
systems but reduce to their type-1 TSK counterparts if the
uncertainties in the membership functions go to zero. The
stability and instability tests are used for the stability analysis
of electricity markets under different market conditions.
There are various time scales in the operation of an electric
power system, from sub-second to longer than a day. At the
sub-second time scale, the electromechanical interactions must
be analyzed for stability. At a slightly slower time scale, shortterm electric power markets have dynamics that can potentially
interact with the electromechanical dynamics. Our interest is in
the stability of the economic equilibrium and we consider an
hourly operation of the electricity market.
Throughout the paper, we use the product t-norm for all
type-1 and type-2 set operations. The superscript denotes the
rule number, as used in the well-known text by Wang [26].

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The paper is organized as follows. Section II discusses the importance of electricity markets and their models. In Section III,
we present our stability and instability conditions for the electricity markets. Section IV presents our stability analysis of electric power markets under different market conditions. Conclusions and future works are given in Section V.
II. ELECTRICITY MARKET MODELING
Nonrenewable fossil fuels have been used to meet the increasing demand for energy for decades despite their negative
environmental impact. Today, it is recognized that renewable
energy must be used to meet part of this increasing demand.
In additions, the traditional structure of the electricity market
has been replaced by the new deregulated electricity markets.
The bidding process breaks the monopoly rules and provides
the market with a better ow. However, all these changes introduce uncertainties in the power system that can threaten the
system if not addressed properly. Intermittency of renewable
resources, limited storage capacity and real-time demand response in the grid are all sources of uncertainties that can put
the system at risk. However the uncertainties can be reduced by
means of optimal short-term and long-term trading strategies,
optimal operation of renewable-thermal power plants, and design and placement of utility-scale energy storages [21][23]. At
the market level, the ISO regulates transactions in the electricity
market to keep it balanced and ensure the secure operation of the
power system. However, the actions of an ISO, in general, do
not guarantee market stability. A separate supervisory system
that complements the ISO is needed to ensure market stability.
This system must account for all market participants and their
interactions with the aid of a comprehensive market model.
Due to the large scale of the power system, a detailed analysis
of the system is often impossible and stability results are obtained for a simplied system model. This paper removes some
of the model simplications used in earlier papers by using a
TSK model that accounts for market nonlinearity and uncertainty. Thus, we are able to obtain results that are valid for a
wider range of operating conditions that exploit the qualitative
knowledge that is typically available for electricity markets. Our
fuzzy model is obtained by modifying the mathematical model
of an electric power market used in [17]. Nonlinear marginal
production cost is considered and the balanced supply and demand condition is not enforced.
For a market with
generating units, the power output of
the th generating unit
is
(1)
is the supplier
where is the market clearing price,
marginal generation cost and
is the supplier time constant.
Similarly, for
consumers, the power consumption of the
th consumer
is
(2)
is the consumer marginal benet and
where
the consumer time constant.

is

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The market clearing price is

governed by
(3)

where the time constant represents the effect of imbalance on

the price. Price dynamics are represented in (3) where variations
in price highly depend on the imbalance in supply and demand.
While the balance of supply and demand is not enforced, the
market will restore such balance in steady-state operation where
price variations vanish. The equilibrium point by denition is at
steady state, where constant supply and constant demand are in
balance.
In these equations,
,
, and are state variables, and
and
are the time constants for the suppliers and consumers, respectively. The consumers' marginal benet function
is given by

Fig. 1. Antecedent membership functions of electric power market type-1 TSK

model.

(4)
While a linear function provides an acceptable model for the
consumers' marginal benet, the suppliers' marginal generation
cost function is more complex in practice. Therefore we avoid
using the linear cost function used in [17] for generation units.
Instead, we use two nonlinear cost functions: a quadratic cost
function based on the heat rate function of a diesel generator
[20] and a sum of a quadratic function and an exponential term
[27]. Regardless of the complexity of the cost function, it can
be modeled with specied accuracy by tting experimental data
with a polynomial of sufciently high order. Note that the coefcients of a polynomial t of order are in general all different
from those of order for
. Thus, the coefcient of the
linear term varies with the order of the polynomial t for the
same data set. Hence, it is not possible to infer the local stability of polynomial model from that of a linear model if both
are obtained by curve tting from experimental data.
To obtain results that are applicable to all nonlinear cost functions proposed in the literature, we use a polynomial of arbitrary
order to represent each cost function. Consider the suppliers'
marginal generation cost as

. We derive local stability results for the stability of the equilibrium point . For a market with multiple feasible equilibrium points, the local stability of each must be investigated separately. The stability results in this paper are based on Lyapunov
stability theory. Therefore, the results are sufcient and local.
In other words, if the stability test or the instability test fails, no
conclusion can be made. Moreover, the results of stability tests
for each market equilibrium are valid in a neighborhood of the
equilibrium.
We assume bounded power generation of each generating unit
,
and bounded power consumption of each consumer
,
.
In addition, we assume that the range in which the price can uctuate is known and bounded as
. These bounds provide
lower bounds and upper bounds on the state vector, where
and
. We use the
modeling methodology of [28] to obtain a type-1 TSK model
with rules of the form

(6)
(5)
where
is the order of the polynomial cost function associated
with th generation unit and
,
are the polynomial coefcients for each generating unit obtained by least
squares curve tting from historical data. If the cost function is
a known nonlinear function, then the coefcients would represent its minimum least-squares approximation.
The dynamics of the market has a total of
state
variables. To simplify the notation, we use the vector
to denote the power generated and the
vector
to denote the power consumed. The state space equations of the market are given by
(1)(3) with the state vector
.
To obtain a TSK model for the electricity market, we rst nd
the equilibrium point of interest

where

and
are fuzzy sets characterized by the membership
functions shown in Fig. 1. Since three fuzzy sets are used
to describe the power generation by each generating unit,
,
the total number of rules is
.
The matrices in the consequent of the rule
in (6) are
given by

(7)

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We start with the stability and instability conditions for electricity market modeled by a type-1 TSK system and then discuss their extension to type-2 TSK models. To state these results
we dene the vector
where
for
.
The TSK electricity market model of (6) is stable if there is
a vector
that satises the
inequality [12]

where

is the center of triangular membership function

i.e.,

. The vectors and are

and

are

,
,

,
,

,
, and

.
Although TSK models are universal approximators of known
functions, they may include signicant errors if they are based
on experimental data [29]. These errors typically result from errors in estimating the parameters of the TSK models. Type-2
TSK models provide a natural representation for uncertainties
in the underlying system and can provide robust stability results in the presence of these uncertainties. Because the parameters of our electricity market models cannot be determined precisely, we model them as type-2 fuzzy systems with uncertainties in their consequent. The fuzzy sets of both the antecedents
and the consequents of the system are chosen as type-1. The
overall TSK fuzzy system is a type-2 TSK system. This class of
type-2 systems is similar to a Mamdani type-1 fuzzy system but
their output is a type-1 set whereas the output of the Mamdani
system is a crisp number. Stability analysis based on the output
of a type-2 TSK system without type reduction provides robust
stability results.
To clarify the effect of the parameter uncertainty on the TSK
system, assume an uncertain price time constant with bounds
. To include this uncertainty in our TSK model, we
replace the crisp value of this parameter in the consequent with
an interval fuzzy set
with the membership
function

The uncertainty in any other parameter of the electricity

market can be modeled similarly. The bounds on each parameter can be found based on error bounds for the data used in
TSK modeling.
III. STABILITY ANALYSIS
ISOs must consider the stability of the electric power market
when determining power exchanges, policies, rules, and regulations. Since these decision variables, as well as many other
variables in the electric power market, are linguistic variables,
TSK models are particularly suited to their representation. We
apply the stability test proposed in [24] to the TSK model of
electricity market (6) to derive stability conditions for the electricity market. We also apply instability conditions proposed in
[25] to obtain instability conditions for the electricity market.

(8)
for all of the rules of the TSK system, where sgn denotes the
sign function.
As typical for stability tests for nonlinear systems, our stability test provides sufcient and local conditions for the stability of the electricity market. Thus, if the vector cannot be
found for an electricity market, the test is inconclusive and one
would resort to a sufcient instability condition as follows.
The TSK electricity market model of (6) is instable if there
is a vector
that satises the
inequality [25]
(9)
for all the rules of the TSK system, where sgn denotes the sign
function.
Conditions (8) and (9) can test the stability and instability
of a type-1 TSK model of an electricity market. However, the
parameters of the electricity markets are not exactly known.
These parameters are calculated based on extensive studies of
the market and include some degree of uncertainty. The uncertainty in these parameters is usually neglected and a nominal
value for each parameter is chosen to investigate the underlying electricity market. To ensure the secure operation of the
market, robust stability analysis must be performed. Such analysis considers all the possible scenarios resulted from various
feasible sets of parameters which the market may undertake and
investigate their stability. If all the scenarios are stable, then
the electricity market is robustly stable. If the stability conditions are not satised, then the electricity market may or may
not be unstable and further investigation is warranted using sufcient instability conditions. While this approach introduces a
degree of conservativeness, the importance of the stability of the
electricity market justies considering all possible scenarios and
ISO must be alert for any possible unstable scenario.
The proposed stability and instability conditions can be used
to determine the stability of electricity markets by testing condition (8) or (9). The number of conditions required for the
stability analysis of an electricity market with
generating
units and
consumers (or categories of consumers) is listed
in Table I. The number of uncertain parameters is denoted as .
Table I shows that the stability tests for type-2 TSK systems require a larger number of conditions than the tests for type-1 TSK
systems. This shows that while the type-2 TSK systems represent a larger class of systems and often result in a better model,
their computational cost is higher than simpler type-1 models.
In practice, electricity market models involve a small number
of consumer categories
, e.g., residential, commercial, etc.,
with a possibly large number of generating units
. Therefore,

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JAFARZADEH et al.: STABILITY ANALYSIS OF ELECTRICITY MARKETS USING TSK FUZZY MODELING

TABLE I
NUMBER OF CONDITIONS REQUIRED FOR THE STABILITY TEST OF AN
ELECTRICITY MARKET WITH
GENERATING UNITS,
CONSUMER
CATEGORIES AND UNCERTAIN PARAMETERS

TABLE II
PARAMETERS FOR GENERATION UNITS

Fig. 2. Unstable market.

it is essential to use reliable software for the stability analysis

of the electricity markets. Our stability and instability tests can
be reformulated as LMIs as detailed in [24]. The scaling vector
will be used as the LMI variable and the conditions can be
tested by solving an LMI feasibility problem using available
LMI software.
IV. STABILITY ANALYSIS OF ELECTRIC POWER MARKET
Here, we obtain type-1 and type-2 TSK models for specic
examples of electricity markets and investigate their stability.
The market parameters used for simulation studies are extracted
from [17], [18], and [27]. We compare type-1 and type-2 models
of the same market and demonstrate the advantages of type-2
models. Finally, we state some observations about the stability
of electricity markets and describe the ISOs viewpoint in this
context.

Fig. 3. Impact of

Although the linearity assumption simplies the stability analysis, it may expose the system to security threats if the linear
approximation is inappropriate.

A. Linear Versus Nonlinear Stability Analysis

B. Impact of

We consider a market with three participants. The rst two are

generation units whose respective marginal generation costs are
a fourth order polynomial
and a quadratic function
. The parameters of the two polynomials are given
in Table II. The third participant is a consumer with
and
. The market with these three participants has a single feasible equilibrium at
6.38 MW,
4.1 MW,
10.48 MW, and
MWh.
Linearizing the market dynamics around this equilibrium point
gives a linear system with a stable state matrix with all of its
eigenvalues in the open left s-plane.
We utilize our TSK modeling and stability analysis as detailed
in Sections II and III to investigate the stability of the market.
Even though the linearized system is stable at the equilibrium,
the TSK model is shown to be unstable using our type-1 stability test. Fig. 2 shows the simulation results for the market
with initial conditions close to the equilibrium. The state trajectories of the market oscillate and diverge. This simple example
shows the importance of nonlinear terms in stability analysis.

To investigate the impact of on market dynamics, we simulate the electricity market of Section IV-A while independently
changing the value of . The simulation results are given in
Fig. 3. The results show that electricity market with higher value
of
has a higher chance of instability.
C. Fixed Demand
The elasticity of the market participants varies. Consumers
may not change their consumption signicantly due to small
changes in price. Such consumers have a xed or inelastic demand. In this example, we consider an electricity market with
xed demand. Such inelasticity in the market simplies the TSK
model because the consumer behavior is static and does not increase the order of the TSK model.
We assume two generators: a diesel generator with a quadratic
cost function

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Fig. 4. Stable market with xed demand.

Fig. 5. Stable market with xed demand and 2% uncertainty in

TABLE III
PARAMETERS FOR GENERATION UNITS

and a generator whose cost function has the quadratic-exponential form [27]
(10)
with parameters
. To obtain the TSK
model of the market, we rst approximate the exponential term
in (10) with a fourth-order polynomial
to obtain

We simulate the market with the parameters of Table III. and

xed demand
6.84 MW. The market equilibrium is at
6.25 MW.
0.59 MW,
MWh. A
TSK stability test on type-1 model of this market shows that
the system is stable. This is veried by the simulation results of
Fig. 4, with initial conditions
.
The above stability of the electricity market does not consider
the effect of model uncertainty. However, the parameters of the
electricity market models are usually determined form experimental data which includes noise and uncertainty. For instance,
assume a 2% perturbation in
in the market under study. To
obtain robust results for electricity markets, we apply our type-2
TSK stability analysis. The type-2 test shows that the electricity
market is robustly stable.
Simulation results for the type-2 TSK model of the market are
shown in Fig. 5. The simulation results of Fig. 5 clearly show
that all possible market scenarios are stable and demonstrate the
robustness of our type-2 TSK stability analysis. Thus, we can
use our type-2 stability results to test the stability of innitely

Fig. 6. Unstable market with xed demand and 10% uncertainty in

many parameter combinations all of which can occur in the presence of parameter uncertainty.
To further show the application of type-2 TSK stability analysis to electricity markets with uncertain parameters, consider
the market under study with a 10% perturbation in
. In this
case, the type-2 stability analysis shows the system to be unstable. Note that the instability of the electricity market does not
necessarily imply the instability of all its trajectories. A single
unstable trajectory is enough to conclude the instability of the
electricity market, even if all other trajectories are stable. The
simulation results for such uncertainty are shown in Fig. 6. The
results show that the system states diverge over time.
This example shows the importance of robust stability analysis for electricity markets. Type-2 stability analysis considers
a system with uncertain parameters and investigates all the
possible trajectories of the system in presence of uncertainty.
Hence, Type-2 TSK stability analysis is an appropriate tool for
electricity markets for this very reason.
D. Large-Scale Electricity Market
In practice, electricity markets have many participants. This
makes it difcult to test conditions (8) and (9). However, the

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TABLE IV
PARAMETERS FOR CONSUMING UNITS

TABLE V
STABILITY ANALYSIS OF ELECTRIC POWER MARKET FOR DIFFERENT
SCENARIOS USING TYPE-2 TSK MODEL

simplicity of these conditions makes it possible to formulate

them as LMIs with the scaling vector as the LMI variable and
test the resulting LMIs for stability analysis. In this case, if a
feasible solution exists for conditions (8) the system is stable, if
it exists for (9) the system is unstable, and if neither exists the
results are inconclusive. We use LMI lab from Robust Control
Toolbox in MATLAB to investigate the stability of electricity
markets with many participants.
We assume an electricity market with 112 generation units
and three categories of consumers. The marginal generation cost
functions are considered to be fourth order polynomials
. The detailed parameters of the generation
units are not listed for brevity. Consumers are classied to residential, agricultural and commercial with the parameters as
listed in Table IV. Table IV shows that the reaction of residential
consumers to price change is slower than agricultural and commercial consumers since its time constant is much larger.
Our stability analysis for type-1 TSK model of this market
shows the stability of the market. However, we are interested
in determining the stability of the market for different levels of
uncertainty in various parameters. We performed this task by
adding interval uncertainties to the parameters of the market and
evaluated the stability of the uncertain type-2 TSK model. These
results are listed in Table V. We vary the degree of uncertainty
in the parameters to create different type-2 TSK models and investigate their stability. The results show that the assumed uncertainty can destabilize the system. This demonstrates the importance of including uncertainties in electricity market models.
For models where the stability test fails, we resort to the instability test. Since both tests are based on sufcient conditions,
the results are inconclusive if both tests fail.
E. Market Observations
Unlike linear systems, evaluation of nonlinear systems may
not result in rm conclusions about the system's stability. As

nonlinear systems, electricity markets have highly complex dynamics, which make it difcult to conclude their stability in
many situations. However, some general observations can be
made. For instance, it is stated in [17] that if the market is stable
for a set of market delays
, it is stable for any other
set of market delays. This consideration holds only for electricity markets with linear dynamics and does not hold for electricity markets with nonlinear dynamics. Therefore, the stability
of electricity markets is not independent of market delays, in
general. However, the operating point of the electricity markets
considered in this study is independent of market delays regardless of the complexity of the market dynamics. Furthermore,
an observation can be made for . Our extensive simulation
studies show that increasing the parameter
can make the
electricity market unstable. An example of such simulations are
presented in Section IV-B. Thus, markets with slower price dynamics have higher chances of instability. This is intuitive as
price has a unique role in electricity markets. All participants
interact through price. Therefore, the price time constant significantly affects market operation. At the system level, the price
in an electricity market can be viewed as a hub through which
all the actions and reactions of the participants pass.
Another observation is that an electricity market with xed
demand is stable if its generation units have a monotonically
increasing marginal cost function, regardless of the complexity
of the dynamics. With xed demand , the system's order will
be reduced to
and the equilibrium point of the market is
at
,
. The resulting
market can be linearized around this equilibrium point to give
..
.

..
.

..

..
.

..
.

..
.

The linearized system is stable when

(11)
monotonically increasing the
Since
functions
will satisfy condition (11).
Therefore, the linearized system will be stable when
,
are monotonically increasing. Finally, the stability of the linearized market will result in local market stability
with nonlinear dynamics.
Since the functions
are usually
monotonically increasing, we conclude that the electricity markets with xed demand are more likely to be stable. In fact, this
agrees with the results of [17] where the only electricity market
with xed demand that is unstable has a generation unit with
monotonically decreasing marginal cost. Fixed demand can be
considered as a special case where the consumer dynamics are
much slower than the market dynamics. In practice, consumers

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8

with slow dynamics (higher time constants) contribute to the

stability of the electricity market.
Another important observation is the effect of nonlinear terms
in the dynamics. These terms are included in the dynamics of
generation units due to their complex marginal cost function.
While the effect of these nonlinearities on the market is complicated, in most cases electricity markets with more nonlinear
terms are more likely to be stable. However, this is not necessarily true for all electricity markets. This observation is important as suggests that if the stability test fails, one may be able
to show stability or instability by tting the data with a higher
order polynomial.
Another issue is the number of participants. In general, the
proposed stability tests are more likely to fail for an electricity
market with more participants. As electricity markets are expanding, this makes their stability analysis more difcult. However, the number of consumers and generation units is also a
determining factor. We observe that for a xed number of participants, a higher number of generation units improves the stability of the electricity market. This is the case for many electricity markets. In practice, the generation units have signicantly different dynamics and should be considered separately
in the market stability analysis while consumer dynamics are
similar and can be categorized. Hence, there are far fewer consumer categories than generation categories which has a stabilizing effect on the market.
F. ISO Considerations
As regulators of electricity markets, ISOs are concerned
about the stability of the market under their supervision. The
advantage of stability analysis for ISOs is evident because they
must constantly monitor the market and evaluate its stability.
In addition, ISOs may want to consider market contingencies
and make sure that the market is not exposed to any hazardous
condition. Type-2 TSK modeling and stability analysis are a
suitable tool for ISOs for two major reasons. First, they include
nonlinearities and uncertainties in the system. Second, the test
determines the stability of the system considering all of the
possible scenarios.
While these advantages are desirable, the main question is
the reaction of the ISO. In general, ISOs have access to resources which help them control the market and navigate market
dynamics. These resources include power exchanges, policies,
rules, regulations, future contracts and energy reserves. Any decision must be made based on the specic market under study
and should be tailored according to available resources.
Since the number of participants in the electricity markets
is large, ISO may expect to encounter unstable situations quite
often. However, most electricity markets are stable in practice.
This is mainly due the lack of elasticity of demand. Most consumers in the electricity markets have slow dynamics and this
compensates for the number of participants. In addition, most
generation units have monotonically increasing marginal cost
functions with fairly complicated nonlinearities. In addition, because power imbalance is constantly kept close to zero, price
uctuations are minimal and this in turn stabilizes electricity
markets.

IEEE TRANSACTIONS ON POWER SYSTEMS

V. CONCLUSION
The California energy crisis of 20002001 showed the threats
of inadequate investigation of the electricity market and their
stability properties. A better investigation of the stability of electricity markets is possible using uncertain nonlinear models that
include qualitative knowledge of the market. This paper proposes TSK fuzzy models of the electricity markets that allow us
to exploit qualitative knowledge and represent nonlinear market
behavior. It provides sufcient conditions for exponential stability as well as sufcient instability conditions for the electricity market. All the stability and instability conditions can be
tested using LMIs. A type-1 and a type-2 TSK model of the electric power market are derived and their stability is investigated
under various market scenarios. The results demonstrate the importance of the nonlinearities and uncertainty in the electricity
market and the ability of TSK models to represent them. The
proposed stability analysis provides ISOs with a tool to study
the effects of uncertainty, introduced into the grid by variable
renewable energy resources and variable demand response, on
the market equilibrium and its stability. Future work will include
the development of TSK market models that include the power
systems dynamics.
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Saeed Jafarzadeh (M'09) received the Ph.D. degree from the University of
Nevada, Reno, NV, USA, in 2012.
He joined the Department of Computer and Electrical Engineering and Computer Science, California State University, Bakerseld, CA, USA, in August
2012, where he is currently an Assistant Professor. His research interests are
in fuzzy systems, stability analysis, nonlinear control, and their application to
power systems, induction motor control, and renewable energy systems.

M. Sami Fadali (M'83SM'91) received the B.S. degree in electrical engineering from Cairo University, Cairo, Egypt, in 1974, the M.S. degree from
the Control Systems Center, UMIST, Manchester, U.K., in 1977, and the Ph.D.
degree from the University of Wyoming, Laramie, WY, USA, in 1980.
He was an Assistant Professor of electrical engineering with the University
of King Abdul Aziz, Jeddah, Saudi Arabia, from 1981 to 1983. From 1983 to
1985, he was a Postdoctoral Fellow with Colorado State University. In 1985,
he joined the Electrical Engineering Department, University of Nevada, Reno,
NV, USA, where he is currently a Professor of electrical engineering. In 1994,
he was a Visiting Professor with Oakland University and GM Research and
Development Laboratories. He spent the summer of 2000 as a Senior Engineer
with TRW, San Bernardino, CA, USA. His research interests are in the areas of
fuzzy logic stability and control, state estimation, and fault detection.

Hanif Livani (S'09M'14) received the Ph.D. degree from Virginia Polytechnic
Insrtitute and State University, Blacksburg, VA, USA, in 2014.
He has been with the Electrical and Biomedical Engineering Department,
University of Nevada, Reno, NV, USA, as an Assistant Professor since July
2014. His research interests are energy market, power system static and dynamic
state estimation, power system operation with renewable energy sources, fault
location applications in smart grid, and statistical methods and signal processing
in power systems.