Demand allocation in local RES electricity market among multiple microgrids and multiple utilities through aggregators

Abstract

The electricity market for Renewable Energy (RE) Sources (RES) has to be transformed into a market that is more competitive and decentralized than the current one, given the failure of subsidy policies, like the Feed-In-Tariff (FIT) policy, and the increase in the number of small producers but also in the number of power utilities. Clearly, each utility must follow regulation rules regarding the proportion of RES units it must have in its energy mix, in order to avoid emission penalties. Following a decentralized market scheme, we address the problem of allocating a total amount of RE demanded by a set of utilities in a local market to individual RES microgrids (MGs) that can cover the demands, considering two supply policies. In the first policy, a RES producer is assumed to be able to split its production into smaller parts so that it can supply multiple utilities, and a simple allocation algorithm is presented. In the second policy, a RES producer, due to market or technical constraints, cannot split its production and share it among utilities. In this case, we provide an algorithm that solves the problem effectively by viewing it as a knapsack problem. If the cost functions of MGs are independent of the utilities to which they sell (e.g., negligible transportation costs), the results show that the non-divisible policy slightly benefits the MGs. However, in a decentralized market, it is natural to assume that the cost functions of the producers depend on the location of the utilities. To account for this, we provide two more allocation algorithms under both examined supply policies. In this case, the non-divisible policy is much more profitable for MGs and, moreover, the entrance of new utilities in the market clearly benefits them over the divisible case.