Abstract
One reason for the allocation of reserves in electricity markets is the uncertainty of demand and supply. If the bias of the generation portfolio shifts from controllable generators to renewable sources with significantly higher uncertainty, it is natural to assume that more reserve has to be allocated. The price of reserve allocation in European models is dominantly paid by the independent system operator in the form of long-term paid reserve capacities and reserve demand bids submitted to various reserve markets. However, if we consider a scenario where the significant part of generation is allocated in day-ahead auctions, the power mix is not known in advance, so the required reserves can not be efficiently curtailed for the ratio of renewables. In the current paper we analyze an integrated European-type, portfolio-bidding energy-reserve market model, which aims to (at least partially) put the burden of reserve allocation costs to the uncertain energy bidders who are partially responsible for the amount of reserves needed. The proposed method in addition proposes a more dynamic and adaptive reserve curtailment method compared to the current practice, while it is formulated in a computationally efficient way.
Highlights
Modern renewable generators do have improved controllability properties compared to earlier solutions, they still exhibit a higher level of supply uncertainty compared to non-renewable generators
We evaluate the proposed method in the case of a simple, single-period market clearing scenario, where supply and demand bids are submitted to energy and positive and negative reserve markets
If the cost of the implied supplementary reserve demand bids (SRDBs) is acceptable and the minimum surplus condition (MSC) holds, the bid will be still accepted in the energy market and its SRDB will be accepted, increasing the total social welfare (TSW) of the reserve market
Summary
Modern renewable generators do have improved controllability properties compared to earlier solutions, they still exhibit a higher level of supply uncertainty compared to non-renewable generators. Uncertainty is present in several forms in the power grid. In addition to renewable sources with fundamental characteristics of production uncertainty (of some level), conventional power plants are naturally subject to failures and technological issues, which may limit their output from time to time. As supply-demand imbalance causes frequency shift in the power network, certain forms of ancillary services (or ‘reserves’ to put it shorter) are needed for frequency stability. Activating these reserves in the appropriate time restores power balance and network frequency. In a typical ancillary market, reserve providers are paid for allocating the required reserves and an additional fee is paid if the reserve is activated as well. In the current paper (regarding reserves) we consider capacity-allocation
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