Towards reliability competition: Non-cooperative market mechanism under high variable renewable energy penetration

Abstract

To encourage variable renewable energy (VRE) penetration, scholars put efforts in building cooperative market mechanisms. Under these mechanisms, VRE generators are treated as negative uncontrollable loads. The advantage of cooperative mechanism is that by cooperative aggregation of the uncertain sources (VREs and uncontrollable loads), some fluctuations cancel out. However, this study points out that the nature of cooperative mechanism will hinder further improvement for either the society-wise production efficiency or the VRE-wise economic efficiency. The key issue is that it is hard for the cooperative mechanisms to define positive marginal cost for VRE, thus blocking the value chain of carbon reduction. To solve the problem, this study proposes to consider reliability as a production characteristic of VRE generators. Based on these proposals, this study establishes a novel non-cooperative reliability competition mechanism for VRE market participation. Under this mechanism, the system is able to generated power at the lowest marginal cost considering both carbon cost and reliability cost. What’s more, the numerical simulation shows that: more VRE generators are able to achieve higher economic efficiency under non-cooperative mechanism compared to cooperative mechanism; the non-cooperative mechanism can provide clear signals for the internal and external marginal cost of generation reliability of VRE. It is shown that under the proposed mechanism, the reliability of VRE-included power generation system can reach the limit of technology in the long run.