Economic and environmental implications of different approaches to hedge against wind production uncertainty in two-settlement electricity markets: A PJM case study

Ali Daraeepour, Dalia Patino-Echeverri and Antonio J. Conejo

Energy Economics, 2019, vol. 80, issue C, 336-354

Abstract: This paper examines the economic and environmental outcomes of four two-settlement electricity market clearing designs. The first design corresponds to a Deterministic Market Clearing (DMC) similar to the mechanism currently used in organized wholesale electricity markets in the United States. The other three designs account for the day-ahead (DA) wind power production uncertainty into the DA market mechanisms either implicitly or explicitly. An Augmented Deterministic Market Clearing (ADMC) design introduces DA ramp-capability products. These products ensure adequate and ramp-feasible electricity generation capacity commitments in the DA stage to cope with the real-time realization of wind power generation. A Hybrid Deterministic Market clearing (HDMC) design augments ADMC by explicitly integrating a characterization of wind power production uncertainty into the residual unit commitment (RUC) process, which is run after the DA market is closed, using stochastic programming. The last design, referred to as stochastic market clearing (SMC), uses stochastic optimization to explicitly account for wind power production uncertainty in the DA market clearing mechanisms (i.e. DA unit commitment and economic dispatch).

Keywords: Two-settlement markets; Market clearing design; Wind energy; Hidden uncertainty costs; Price formation (search for similar items in EconPapers)
JEL-codes: C61 C63 D44 D47 D81 Q41 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:80:y:2019:i:c:p:336-354

DOI: 10.1016/j.eneco.2019.01.015

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