A proposed hedge-based energy market model to manage renewable intermittency

Chris Johnathon, Ashish Prakash Agalgaonkar, Chayne Planiden and Joel Kennedy

Renewable Energy, 2023, vol. 207, issue C, 376-384

Abstract: Renewable energy power producers are exposed to significant volatility in revenue due to intermittency associated with wind and solar energy. Moreover, higher penetration of variable renewable energy in the electric grids is significantly increasing the cost associated with procuring reserves, resulting in higher electricity costs to consumers. Hence, a market that can appropriately distribute the cost of procuring reserves whilst ensuring revenue stability for renewable energy producers is crucial. In this work, the authors propose a novel hedge-based energy market model that allows renewable generators to secure hedge contracts from flexible generating technologies as insurance against weather-driven energy deficits. The proposed model supplements a representative day-ahead market model and maximizes the revenue of market participants whilst diminishing the costs of procuring reserves and generating investment signals for green projects. A mathematical model is formulated to determine market equilibrium based on the Karush Kuhn Tucker (KKT) optimality conditions. Simulation studies are carried out to demonstrate the efficacy of the proposed model on a test network using MATLAB. The theoretical results are verified by simulation results and provide a feasible region in which mutually acceptable hedge contracts result in higher overall revenues. The results show that a hedge-based energy market model can be deployed to manage renewable intermittency in a day-ahead energy market model to address the risk management needs of renewable power producers.

Keywords: Energy market; Variable renewable energy; Green finance; Market modeling (search for similar items in EconPapers)
Date: 2023
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:renene:v:207:y:2023:i:c:p:376-384

DOI: 10.1016/j.renene.2023.03.017

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