Bi-Level Approach for Load Serving Entity’s Sale Price Determination under Spot Price Uncertainty and Renewable Availability

Abstract

Load serving entities (LSEs) maximise their profit by increasing the difference between revenue from electricity sale to consumers and the cost of procuring that electricity. Considering the offered sale prices, consumers minimise energy bills by scheduling their energy consumption. Varying spot market prices and consumer behaviour impact LSE’s electricity procurement and sale price decisions. The two conflicting objectives of LSE profit maximization and consumer cost minimization can be modelled effectively by hierarchical bi-level programming. Additionally, LSE has to consider spot market price uncertainty and renewable availability during different hours of the day. This paper considers these issues for LSE’s risk-based profit maximization decision making model under RE availability by proposing a bi-level framework to determine optimal dynamic sale prices and energy procurement decisions. The upper level considers risk-based profit maximization for LSE and the lower level addresses the consumer’s objective of cost minimization. This work considers Conditional Value at Risk (CVaR) to model spot market price risk for pragmatic characterisation of LSE’s risk-averse behaviour. A case study on the PJM market shows the effectiveness of the proposed approach.