Impact of forecast uncertainty and electricity markets on the flexibility provision and economic performance of highly-decarbonized multi-energy systems

Abstract

To enable the widespread integration of volatile renewable energy for decarbonization, electricity systems will need to become significantly more flexible to absorb power fluctuations. Therefore, current fossil-fueled flexible power generation will have to be complemented and partially replaced by decentralized flexibility. To address flexibility challenges, multi-energy system (MES) is a promising concept. In this paper, a MES design and operation optimization model is developed considering flexibility provision. MES technologies are harnessed to provide flexibility to the electricity grid in the form of frequency control reserves after mitigating the impact of load and generation forecast errors within the MES. The developed optimization model is applied to a neighborhood MES in Switzerland, participating in the day ahead and intraday electricity spot markets and the daily and weekly tenders for frequency control reserves via the ancillary services market. Results show that the MES designed to achieve 80% decarbonization offers up to 15–45% of its available capacity as flexible reserves to the surrounding electricity grid after reserving 2–10% of its available capacity to mitigate the impact of forecast errors. Battery storage systems (BSS) and heat pumps (HPs) offer flexibility and revenues from flexible reserves provide economic benefits to operations. However, the revenues offered by current electricity markets are not attractive enough to incentivize the MES design. Short ancillary service delivery periods and attractive ancillary service remuneration rates combined with large BSS capacity and high decarbonization targets foster flexible reserves.