Enabling participation of demand-side flexibility in electricity markets is key to improving power system resilience and increasing the penetration of renewable generation. In this work we are motivated by the curtailment of near-zero-marginal-cost renewable resources during periods of oversupply, a particularly important cause of inefficient generation dispatch. Focusing on shiftable load in a multi-interval economic dispatch setting, we show that incompatible incentives arise for loads in the standard market formulation. While the system's overall efficiency increases from dispatching flexible demand, the overall welfare of loads can decrease as a result of higher spot prices. We propose a market design to address this incentive issue. Specifically, by imposing a small number of additional constraints on the economic dispatch problem, we obtain a mechanism that guarantees individual rationality for all market participants while simultaneously obtaining a more efficient dispatch. Our formulation leads to a natural definition of a uniform, time-varying flexibility price that is paid to loads to incentivize flexible bidding. We provide theoretical guarantees and empirically validate our model with simulations on real-world generation data from California Independent System Operator (CAISO).
more »
« less
Distribution-level markets under high renewable energy penetration
We study the market structure for emerging distribution-level energy markets with high renewable energy penetration. Renewable generation is known to be uncertain and has a close-to-zero marginal cost. In this paper, we use solar energy as an example of such zero-marginal-cost resources for our focused study. We first show that, under high penetration of solar generation, the classical real-time market mechanism can either exhibit significant price-volatility (when each firm is not allowed to vary the supply quantity), or induce price-fixing (when each firm is allowed to vary the supply quantity), the latter of which leads to extreme unfairness of surplus division. To overcome these issues, we propose a new rental-market mechanism that trades the usage-right of solar panels instead of real-time solar energy. We show that the rental market produces a stable and unique price (therefore eliminating price-volatility), maintains positive surplus for both consumers and firms (therefore eliminating price-fixing), and achieves the same social welfare as the traditional real-time market. A key insight is that rental markets turn uncertainty of renewable generation from a detrimental factor (that leads to price-volatility in real-time markets) to a beneficial factor (that increases demand elasticity and contributes to the desirable rental-market outcomes).
more »
« less
- Award ID(s):
- 2129631
- NSF-PAR ID:
- 10414031
- Date Published:
- Journal Name:
- Thirteenth ACM International Conference on Future Energy Systems (ACM e-Energy 2022)
- Page Range / eLocation ID:
- 127 to 156
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
More Like this
-
-
Integrating renewable energy into the manufacturing facility is the ultimate key to realising carbon-neutral operations. Although many firms have taken various initiatives to reduce the carbon footprint of their facilities, there are few quantitative studies focused on cost analysis and supply reliability of integrating intermittent wind and solar power. This paper aims to fill this gap by addressing the following question: shall we adopt power purchase agreement (PPA) or onsite renewable generation to realise the eco-economic benefits? We tackle this complex decision-making problem by considering two regulatory options: government carbon incentives and utility pricing policy. A stochastic programming model is formulated to search for the optimal mix of onsite and offsite renewable power supply. The model is tested extensively in different regions under various climatic conditions. Three findings are obtained. First, in a long term onsite generation and PPA can avoid the price volatility in the spot or wholesale electricity market. Second, at locations where the wind speed is below 6 m/s, PPA at $70/MWh is preferred over onsite wind generation. Third, compared to PPA and wind generation, solar generation is not economically competitive unless the capacity cost is down below USD1.5 M per MW.more » « less
-
more » « less
Abstract Prosumers adopt distributed energy resources (DER) to cover part of their own consumption and to sell surplus energy. Although individual prosumers are too dispersed to exert operational market power, they may collectively hold a strategic advantage over conventional generation in selecting DER capacity via aggregators. We devise a bilevel model to examine DER capacity sizing by a collective prosumer as a Stackelberg leader in an electricity industry where conventional generation may exert market power in operations. At the upper level, the prosumer chooses DER capacity in anticipation of lower-level operations by conventional generation and DER output. We demonstrate that exertion of market power in operations by conventional generation and the marginal cost of conventional generation affect DER investment by the prosumer in a nonmonotonic manner. Intuitively, in an industry where conventional generation exerts market power in operations similar to a monopoly (MO), the prosumer invests in more DER capacity than under perfectly competitive operations (PC) to take advantage of a high market-clearing price. However, if the marginal cost of conventional generation is high enough, then this intuitive result is reversed as the prosumer adopts more DER capacity under PC than under MO. This is because the high marginal cost of conventional generation prevents the market-clearing price from decreasing, thereby allowing for higher prosumer revenues. Moreover, competition relieves the chokehold on consumption under MO, which further incentivises the prosumer to expand DER capacity to capture market share. We prove the existence of a critical threshold for the marginal cost of conventional generation that leads to this counterintuitive result. Finally, we propose a countervailing regulatory mechanism that yields welfare-enhancing DER investment even in deregulated electricity industries.
-
Vidick, T. (Ed.)We study auctions for carbon licenses, a policy tool used to control the social cost of pollution. Each identical license grants the right to produce a unit of pollution. Each buyer (i.e., firm that pollutes during the manufacturing process) enjoys a decreasing marginal value for licenses, but society suffers an increasing marginal cost for each license distributed. The seller (i.e., the government) can choose a number of licenses to put up for auction, and wishes to maximize the societal welfare: the total economic value of the buyers minus the social cost. Motivated by emission license markets deployed in practice, we focus on uniform price auctions with a price floor and/or price ceiling. The seller has distributional information about the market, and their goal is to tune the auction parameters to maximize expected welfare. The target benchmark is the maximum expected welfare achievable by any such auction under truth-telling behavior. Unfortunately, the uniform price auction is not truthful, and strategic behavior can significantly reduce (even below zero) the welfare of a given auction configuration. We describe a subclass of “safe-price” auctions for which the welfare at any Bayes-Nash equilibrium will approximate the welfare under truth-telling behavior. We then show that the better of a safeprice auction, or a truthful auction that allocates licenses to only a single buyer, will approximate the target benchmark. In particular, we show how to choose a number of licenses and a price floor so that the worst-case welfare, at any equilibrium, is a constant approximation to the best achievable welfare under truth-telling after excluding the welfare contribution of a single buyer.more » « less
-
null (Ed.)Pricing multi-interval economic dispatch of electric power under operational uncertainty is considered in this two-part paper. Part I investigates dispatch-following incentives for generators under the locational marginal pricing (LMP) and temporal locational marginal pricing (TLMP) policies. Extending the theoretical results developed in Part I, Part II evaluates a broader set of performance measures under a general network model. For networks with power flow constraints, TLMP is shown to have an energy-congestion-ramping price decomposition. Under the one-shot dispatch and pricing model, this decomposition leads to a nonnegative merchandising surplus equal to the sum of congestion and ramping surpluses. It is also shown that, comparing with LMP, TLMP imposes a penalty on generators with limited ramping capabilities, thus giving incentives for generators to reveal their ramping limits truthfully and improve their ramping capacities. Several benchmark pricing mechanisms are evaluated under the rolling-window dispatch and pricing models. The performance measures considered are the level of out-of-the-market uplifts, the revenue adequacy of the system operator, consumer payment, generator profit, level of discriminative payment, and price volatility.more » « less
- Free Publicly Accessible Full Text
-
Accepted Manuscript1.0
- Conference Paper:
- https://doi.org/10.1145/3538637.3538846
