Differentiated Pricing-Mechanism Design for Renewable Energy with Analytical Uncertainty Representation

Xianzhuo Liu, Xue Yuan (), Qi An and Jiale Liu
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Xianzhuo Liu: China Southern Power Grid Dispatching and Control Center, Guangzhou 510663, China
Xue Yuan: State Key Laboratory of Alternate Electrical Power System with Renewable Energy Sources, North China Electric Power University, Beijing 102206, China
Qi An: State Key Laboratory of Alternate Electrical Power System with Renewable Energy Sources, North China Electric Power University, Beijing 102206, China
Jiale Liu: China Southern Power Grid Dispatching and Control Center, Guangzhou 510663, China

Energies, 2025, vol. 18, issue 18, 1-23

Abstract: With the integration of high-penetration renewable energy, existing uniform marginal pricing mechanisms face critical challenges, including difficulty in recovering flexibility resource capacity costs and free-riding phenomena caused by renewable energy’s variability. To address these issues, this paper proposes a differentiated pricing mechanism for renewable energy based on analytical uncertainty representation to avoid marginal price distortion and promote the rational allocation of ancillary service costs. Firstly, a joint clearing model for energy and reserve ancillary service is developed, incorporating a distributional robust chance constraint based on moment information to model the uncertainty of renewable energy. Then, the composition structure of the nodal marginal price for ancillary service demand is redefined, offering clearer and more explicit price signals compared with traditional uniform marginal pricing. After that, quantification of the impact of energy storage on renewable energy forecast errors and ancillary service pricing is conducted, with a systematic analysis of its role in reducing ancillary service costs and optimizing generation revenue. Simulation results on the modified IEEE 30-bus system demonstrate significant advantages over traditional uniform pricing: the proposed mechanism ensures fair cost allocation, effectively mitigates free-riding problems, and provides clear economic signals. With energy storage units regulating renewable power output, it could lead to a 12.9% reduction in ancillary service costs while increasing total generation revenue by 6.73%.

Keywords: ancillary service; differentiated pricing; high proportion of renewable energy; market clearing; uncertainty distribution (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: 2025
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