Research on the settlement rules with the forecast error penalty of aggregation of photovoltaic systems and energy storage systems considering the capacity factor-based capacity payment coefficient

Abstract

Distributed energy resources are gaining worldwide momentum as a key strategy for achieving carbon neutrality. However, their inherent volatility and unpredictability pose significant challenges to the stability and efficiency of power system operations. In the Korean electricity market, the incentives for forecasting renewable energy generation are inadequate for enhancing prediction accuracy. Consequently, there is a growing effort to develop methods to seamlessly integrate aggregated resources into the electricity market, thereby addressing the shortcomings of current incentive structures. With this trend, the previous study introduced the concept of a capacity factor-based capacity payment coefficient aimed at mitigating the gap between installed and available capacity of the aggregator. Nonetheless, the proposed approach could not enhance the reliability of the aggregator’s available capacity. Thus, we aim to present a penalty system capable of minimising the prediction errors associated with aggregated resources. Furthermore, we intend to develop a settlement rule that incorporates the penalty within the previously proposed capacity factor-based capacity payment coefficient. To assess the effectiveness of our proposed settlement rule, we conduct a comprehensive case study, comparing profit outcomes with and without the application of the penalty. Our analysis encompasses variations in profit for aggregators and strategies for their profit maximisation.