Impact of the Uncertainty of Distributed Renewable Generation on Deregulated Electricity Supply Chain

Abstract

Active districts are districts that have a system in place to coordinate distributed energy generation and external grid to meet the local energy demand. They are now widely recognized as a clear opportunity toward distributed renewable integration. Despite apparent benefits of incorporating renewable sources in an active district, uncertainty in renewable generation can impose unprecedented challenges in efficient operation of the existing deregulated electricity supply chain, which is designed to operate with no or little uncertainty in both supply and demand. While most previous studies focused on the impact of renewables on the supply side of the supply chain, we investigate the impact of distributed renewable generation on the demand side. In particular, we study how the uncertainty from distributed renewable generation in an active district affects the average buying cost of utilities and the cost-saving of the active district. Our analysis shows that the renewable uncertainty in an active district can: 1) increase the average buying cost of the utility serving the active district, termed as local impact and 2) somewhat surprisingly, reduce the average buying cost of other utilities participating in the same electricity market, termed as global impact . Moreover, the local impact will lead to an increase in the electricity retail price of active district, resulting in a cost-saving less than the case without renewable uncertainty. These observations reveal an inherent economic incentive for utilities to improve their load forecasting accuracy, in order to avoid economy loss and even extract economic benefit in the electricity market. We verify our theoretical results by extensive experiments using real-world traces. Our experimental results show that a 9% increase in load forecasting error (modeled by the standard deviation of the mismatch between real-time actual demand and day-ahead purchased supply) will increase the average buying cost of the utility by 10%.