Bidding Strategy of a Microgrid Considering Risk Interdependence between Electricity and Carbon Markets

Abstract

Carbon emission trading can effectively eliminate the externality of pollution through a market-oriented way. Accordingly, carbon emission quotas have typical properties of financial products, and can significantly affect the profits of a microgrid by participating in a joint market of electricity and carbon as a single entity. Due to the fluctuation of the carbon price and the interdependence between carbon price and electricity price, a microgrid should inevitably take risk aversion into consideration in developing optimal bidding strategies. Given this background, the Copula theory is employed to model the joint probability distribution of the electricity price and carbon price first. Then, gas turbines, distributed generation units, demand side resources and electric vehicles (EVs) are all integrated into a microgrid, and comprehensive uncertainties of the microgrid are modeled by Copula and conditional value at risk (CVaR). To minimize the CVaR under the expected profit, an optimal bidding strategy for a microgrid considering risk interdependence between the electricity and carbon prices is addressed. Finally, based on stochastic simulations some case studies are carried out and compared under different scenarios, and the effectiveness and robustness of the proposed method are thus demonstrated.