A multi-criteria decision-making model to determine the optimal share of variable renewable energy sources in a wholesale electricity market

Abstract

In recent years, the development of renewable energy technologies has gotten increasing attention due to the realization of cleaner production and high energy efficiency. Therefore, the proportion of these resources in electricity production has experienced a dramatic increase. However, with the features of intermittent nature and merit order effects, it is challenging to effectively optimize the integration of renewable energy sources (RES) into the electricity markets. To deal with the complex problem of selecting the proportionate share of non-dispatchable RES for participation in the market, this paper establishes a multi-criteria decision-making (MCDM) framework, which combines the Analytic Hierarchy Process (AHP) and Simple Additive Weighting (SAW). Five criteria are defined and the corresponding mathematical model is solved by the proposed AHP-SAW method. In this way, the optimal share of renewable resources for participation in the wholesale market can be determined based on the desired criteria. Also, to compare the results obtained by the AHP-SAW method, the criteria weights are determined by Shannon entropy, and the problem is solved by the TOPSIS method. To assert the effectiveness of the proposed framework, two case studies are done. According to the results, by increasing the RES penetration level, the average price of the market decreases mildly while price volatility increases significantly . Also, the amount of forward contracts is decreased when the RES share increases. Moreover, the results show that a high amount of RES is not necessarily desirable and depends on the type of renewable resources and policymakers' priorities. The results for systems 1 and 2 indicate that the maximum allowable amount of RES are 85.359 and 38.24 MW, respectively.