Stochastic risk-sensitive market integration for renewable energy: Application to ocean wave power plants

Kwami Senam A. Sedzro, Shalinee Kishore, Alberto Lamadrid and Luis F. Zuluaga

Applied Energy, 2018, vol. 229, issue C, 474-481

Abstract: With the expected increase of intermittent renewable energy resources on the electric power grid, short-term reserve markets can prove to be a critical reliability asset. This paper introduces and tests a potential market structure that includes a short-term reserve market for renewable resources where the realized energy is drawn within the bounds of the hourly capacity offered. The study presents a risk-aware stochastic model that determines, based on the day-ahead offer derived using a classic newsvendor formula, the best intraday offers for a renewable energy power plant. The stochastic approach takes into account the uncertainties of energy production and market prices. The proposed risk-sensitive model aims to maximize the renewable power plant’s revenues and minimize potential risks of loss in a multi-product multi-timescale market setup. To demonstrate the effectiveness of the proposed formulation, we study the case of a hypothetical 750-kW wave power plant coupled with energy storage. The study shows that the risk of profit loss is not uniformly distributed across the risk-aversion factor space. We also find that the introduction of the short-term reserve market results in a wider range of conditional value at risk while inducing 5% profit increase and a lower profit reduction across the risk range. In addition, the study reveals that the short-term reserve market is profitable for both the system operator and the wave energy power plant considered.

Keywords: Grid reliability; Market design; Renewable integration; Energy storage; Optimization; Short-term reserve market (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:appene:v:229:y:2018:i:c:p:474-481

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DOI: 10.1016/j.apenergy.2018.07.091

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