Investigating the impact of demand-side flexibility on market-driven generation planning toward a fully decarbonized power system

Junkai Wang, Dawei Qiu, Yi Wang, Yujian Ye and Goran Strbac

Energy, 2025, vol. 324, issue C

Abstract: The power system is undergoing a historic transition toward 100% renewable energy, posing significant challenges to operation of conventional power systems and energy markets due to the intermittency of renewable sources. In this context, flexible resources are being deployed to address these challenges, yet their market viability remains underexplored. This paper fills that gap by developing a bi-level optimization framework to assess the impact of flexibility on generation planning in energy markets. The upper-level problem models the profit-driven planning problem of the generation company, while the lower-level problems represent market clearing processes: one for day-ahead and real-time markets with carbon constraints, and another for the green certificate market. To account for uncertainties in demand and renewable generation, a chance-constrained approach is adopted, reformulated as a second-order conic program for tractability. The model is then transformed into a single-level mathematical program with equilibrium constraints using Karush–Kuhn–Tucker conditions and further recast as a mixed-integer quadratic program. There is a four-fold scope in terms of the examined case studies. First, they assess the benefits of demand flexibility within a deregulated market environment in terms of mitigating the massive renewable uncertainty. Second, they highlight the significant value of energy storage systems in integrating substantial renewable generation and guaranteeing stable system operation. Third, they rigorously validate the high levels of demand flexibility, in conjunction with the utility-scale energy storage systems, which not only ensure the stable operation of a 100% renewable power system but also guarantee adequate economic benefits. Finally, they demonstrate how flexibility resources play distinct roles in traditional and fully decarbonized power systems, and how they affect their respective business cases.

Keywords: Generation planning; Energy markets; Carbon trade schemes; Demand flexibility; Energy storage; Bi-level optimization (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:324:y:2025:i:c:s0360544225013349

DOI: 10.1016/j.energy.2025.135692

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