Optimal Operation of Critical Peak Pricing for an Energy Retailer Considering Balancing Costs

Hye Yoon Song, Gyu Sub Lee and Yong Tae Yoon
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Hye Yoon Song: Department of Electrical and Computer Engineering, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 08826, Korea
Gyu Sub Lee: Department of Electrical and Computer Engineering, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 08826, Korea
Yong Tae Yoon: Department of Electrical and Computer Engineering, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 08826, Korea

Energies, 2019, vol. 12, issue 24, 1-20

Abstract: Recently, there have been frequent fluctuations in the wholesale prices of electricity following the increased penetration of renewable energy sources. Therefore, retailers face price risks caused by differences between wholesale prices and retail rates. As a hedging against price risk, retailers can utilize critical peak pricing (CPP) in a price-based program. This study proposes a novel multi-stage stochastic programming (MSSP) model for a retailer with self-generation photovoltaic facility to optimize both its bidding strategy and the CPP operation, in the face of several uncertainties. Using MSSP, decisions can be determined sequentially with realization of the uncertainties over time. Furthermore, to ensure a global optimum, a mixed integer non-linear programming is transformed into mixed integer linear programming through three linearization steps. In a numerical simulation, the effectiveness of the proposed MSSP model is compared with that of a mean-value deterministic model based on a rolling horizon method. We also investigate the optimal strategy of a retailer by changing various input parameters and perform a sensitivity analysis to assess the impacts of different uncertain parameters on the retailer’s profit. Finally, the effect of the energy storage system on the proposed optimization problem is investigated.

Keywords: critical peak pricing; demand response; retailer; multi-stage stochastic programming; rolling horizon method (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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