Wholesale Market Prices Research Articles

A Coordination Mechanism For Reducing Price Spikes in Distribution Grids

Recently, given the increased integration of renewables and growing uncertainty in demand, the wholesale market price has become highly volatile. Energy communities connected to the main electricity grid may be exposed to this increasing price volatility. Additionally, they may also be exposed to local network congestions, resulting in price spikes. Motivated by this problem, in this paper, we present a coordination mechanism between entities at the distribution grid to reduce price volatility. The mechanism relies on the concept of duality theory in mathematical programming through which explicit constraints can be imposed on the local electricity price. Constraining the dual variable related to price enables the quantification of the demand-side flexibility required to guarantee a certain price limit. We illustrate our approach with a case study of a congested distribution grid and an energy storage system as the source of the required demand-side flexibility. Through detailed simulations, we determine the optimal size and operation of the storage system required to constrain prices. An economic evaluation of the case study shows that the business case for providing the contracted flexibility with the storage system depends strongly on the chosen price limit.

Conditional-Robust-Profit-Based Optimization Model for Electricity Retailers with Shiftable Demand

This paper investigates the problem of how to deploy customers’ shiftable load (SL) for electricity retailers’ risk management under uncertainty of the day-ahead (DA) wholesale market price. The robust profit (RP) and the conditional robust profit (CRP) are introduced for a risk-averse retailer’s risk-reward trade-off analysis in its decision-making of electricity procurement from various options. A CRP-based bi-level optimization model is proposed for the risk-averse retailer to determine its electricity procurement strategy taking into consideration customers’ shiftable load. In the upper problem, the retailer decides its electricity procurement from various options and the SL incentive prices to maximize its CRP under a given confidence level, and in the lower problem, the customers shift their load according to the SL incentive prices to minimize their comprehensive costs including the discomfort cost caused by rescheduling electricity consumption. Finally, a case study is used to verify the effectiveness of this model. It is shown that the retailer can achieve larger profit and less risk by utilizing customers’ SL and the retailer’s risk-aversion level has an important impact on its electricity procurement and SL incentive strategies.

Investigating the effects of demand flexibility on electricity retailers’ business through a tri‐level optimisation model

The investigation of the effects of demand flexibility on the pricing strategies and the profits of electricity retailers has recently emerged as a highly interesting research area. However, the state-of-the-art, bi-level optimisation modelling approach makes the unrealistic assumption that retailers treat wholesale market prices as exogenous, fixed parameters. This study proposes a tri-level optimisation model, which drops this assumption and represents the wholesale market clearing process endogenously, thus capturing the realistic implications of a retailer's pricing strategies and the resulting demand response on the wholesale market prices. The scope of the examined case studies is three-fold. First of all, they demonstrate the interactions between the retailer, the flexible consumers and the wholesale market and analyse the fundamental effects of the consumers’ time-shifting flexibility on the retailer's revenue from the consumers, its cost in the wholesale market and its overall profit. Furthermore, they analyse how these effects of demand flexibility depend on the retailer's relative size in the market and the strictness of the regulatory framework. Finally, they highlight the added value of the proposed tri-level model by comparing its outcomes against the state-of-the-art bi-level modelling approach.

Stochastic Economic Dispatching Strategy of the Active Distribution Network Based on Comprehensive Typical Scenario Set

The increasing penetration of renewable energy resources in the distribution network has posed great uncertainties and challenges for the system security operation. To model various uncertain factors like the wholesale market price and renewable energy generation in the active distribution network (ADN), a similarity measurement method considering the amplitude, volatility and variation trend is proposed. The Latin hypercube sampling method and Graph Pyramid clustering algorithm are adopted to obtain the comprehensive typical scenario set. Furthermore, this study proposes a scenario-based stochastic day-ahead optimal economic dispatch approach based on typical scenario set. The energy trading between the distribution system and the wholesale energy market, various distributed generators, network topology and power flow model are jointly formulated in the proposed operation model. The effectiveness and scalability of the proposed approach are verified using the IEEE 33-bus system. Numerical simulation results under different implementation scenarios indicate that the proposed approach offers a high computational efficiency and promotes the security and economy of the distribution system operation, which has a promising industrial application value.

Optimal Operation Scheduling of a Microgrid Incorporating Battery Swapping Stations

This paper proposes optimal operation scheduling of a Microgrid (MG) and battery swapping stations (BSSs) as two independent stakeholders with inherently conflicting objectives. In this regard, a bi-level scheduling framework for optimal decision making of MG and BSSs is presented. Moreover, battery degradation cost is explicitly modeled based on the depth of discharge and the cycle life's intrinsic behavior of batteries. In order to tackle both historical data-based and human-related uncertainties under incomplete information including load demand of MG, photovoltaic generation, wholesale market prices, and swapping requests, a hybrid probabilistic-possibilistic approach considering correlation among uncertainties has been developed. To solve the proposed MG-BSS optimization problem, alternative direction method of multipliers (ADMM) with restart algorithm in a fully decentralized fashion is implemented. The effectiveness of the proposed model is demonstrated on a real-test MG system under different scenarios. Moreover, to compare the computational complexity of the proposed algorithm with the standard ADMM and investigate the scalability of the algorithm, extensive simulations are carried out on different standard test system.

Aligning prosumers with the electricity wholesale market – The impact of time-varying price signals and fixed network charges on solar self-consumption

PV-battery systems are currently not operated in an energy system optimal way as their operation heuristic (maximization of self-consumption) is generally unaffected by competitive market signals. To evaluate potential regulatory intervention, we propose a market alignment indicator which measures the relative economic efficiency of a prosumer battery compared to a benchmark system that is completely responsive to wholesale market prices. Investigating the case of PV-battery systems in Germany, we find that scarcity signals transmitted to prosumers improve the market alignment of PV-battery systems while retaining similar levels of self-consumption and autarky rates. Both dynamic prices for generation (time-varying feed-in remuneration) and consumption (real-time electricity prices) can improve welfare, that is lowering consumer expenditures for electricity at the wholesale market. The effectiveness of the respective instrument mix depends on the relative levels of the feed-in tariff, the grid consumption to be saved and the solar generation costs. Accordingly, increasing fixed network charges can have a significant positive impact on the market alignment of prosumer batteries if combined with dynamic prices, as they change the relative composition of retail prices.

Sustainable fresh produce business practice: a case of SWIFT Co. Ltd.

SWIFT Company Ltd. has the following company mission statement: it will supply only premium quality produce with the highest standard of food safety and every stakeholder in the value chain must fairly benefit from the company's operation. A major problem of the smallholder farmer's structure is that they have to sell their products through middlemen, meaning that they cannot set the price for their own produce since the wholesale market price depends on the demand and supply of that particular time of the day. Swift Co. Ltd. created the model of long-term contract farming with groups of farmers by guaranteeing a minimum buying price, which means that farmers have minimum 100% of margin on the investment. But if the market price goes up, perhaps because their products were destroyed by bad weather, the company will buy at the market price. On the other hand, if the market price goes down when there is a supply surplus, the company will buy at the guaranteed price; our contract farming with farmers has been sustainable for more than 20 years. All the products from contracted farms are produced under strictly controlled safety conditions and quality of the products under the highest food safety and quality standards such as GLOBAL GAP, AGROCHEMICAL FREE, and ORGANIC FARMING while they are processed under, BRC standard, HACCP, TRACEABILITY and SEDEX SMETA. That is why SWIFT products have been well accepted by customers in Europe, Japan, USA, and Australia for more than 3 decades.

Liberalization and customer behavior in the Portuguese residential retail electricity market

The final step that Portugal is taking to reach a fully liberalized electricity market is the deregulation of the retail market by phasing-out regulated electricity prices and reducing the administrative burdens in this area. These attempts are done to promote the entrance of companies into the retailing business and to actively engage the end-users in the market. This analysis shows that despite high consumer switching rates during the 2013–2015 period, the retail market in Portugal is still highly concentrated. The retail rates are also not following the changes in the wholesale market price.

Performance of Permanent Vegetable Production Systems Designed with the PermVeg Model for the Red River Delta, Vietnam

The aim of the research described was to design permanent vegetable production systems for the Red River Delta in Vietnam. Permanent vegetable production systems better meet the increasing consumer demand for vegetables and may increase farmers’ income. Optimum crop sequences for permanent vegetable production in the Red River Delta were designed with the recently developed model PermVeg. The crop sequences designed were tested in a field experiment from May 2007 to May 2009. The production systems tested were five systems designed according to the scenarios of (i) high profitability, (ii) low labor requirement, (iii) low costs of pesticide use, (iv) high level of crop biodiversity, and (v) low perishable products, respectively. The five systems were compared with the traditional vegetable production system. At local prices, only the high profitability and low labor requirement systems yielded significantly higher profits than the traditional system. At city wholesale market prices, profits of all permanent vegetable production systems were significantly higher than that of the traditional system, except for the low perishability system. Permanent vegetable production systems required more labor than the traditional system. Labor-day incomes of permanent vegetable production systems generally were not higher than those of the traditional system. The labor-day income increased only with the low labor requirement system at city wholesale market prices. The model outcomes correlated reasonably well with the labor requirement and the length in days of production systems in the field. The model poorly predicted profits and costs of pesticide use. We concluded that permanent vegetable production systems can yield higher profits than the traditional system, and can contribute to enhancing employment opportunities and increasing household income.

Managing renewable energy production risk

Abstract The growing share of renewables paired with their intermittent nature introduces significant new challenges for market participants along the value-chain in power markets. Taking the view of an owner of such a physical renewable asset we showcase the management of the associated stochastic production risks in Germany, one of the most dynamic electricity markets and the largest producer of renewable energy in the EU-28. We find that unhedged renewable portfolios are very risky and existing vanilla derivatives are poor hedges. New exotic quantity-related weather contracts proposed by major energy exchanges (EEX) show a lot of potential but are still very illiquid. Their hedging performance is heavily driven by the market wide renewable generation portfolio which, in its current state, favors specific regions. In the long-run price-related derivatives will transform into more useful hedging instruments due to the growing importance of renewables in the formation of wholesale market prices.

A decentralized robust model for coordinated operation of smart distribution network and electric vehicle aggregators

Aggregators act as a mediator between electric vehicles (EVs) and distribution network operator (DNO), providing mutual advantages for both. To achieve these advantages, the optimal operation of distribution network and EV aggregators (EVAs) should be coordinated. This paper aims at establishing a decentralized robust model to minimize the total cost of the system by operating the smart distribution network (SDN) and EVAs in a coordinative manner. To tackle the enforced operating uncertainties associated with wind generation and wholesale market price, an adaptive robust optimization (RO) approach is utilized enabling DNO to adjust different conservation levels throughout the operating horizon. In order to preserve the independency of EVAs and reduce the computational burden, the RO based model is solved using a decentralized algorithm which is developed based on the alternating direction method of multipliers (ADMM). Accordingly, the operating problems of DNO and EVAs are coordinated and optimized, independently. The effectiveness of proposed model is demonstrated using a modified 33-bus smart distribution network with multiple EVAs.

Transition and Integration of the ERCOT Market with the Competitive Renewable Energy Zones Project

In this study, we seek to explore the impact of a state level transmission expansion project, the Competitive Renewable Energy Zones (CREZ), whose goal is to integrate a massive amount of wind energy, on the wholesale market prices in the Electric Reliability Council of Texas (ERCOT). We find strong evidence for price convergence across ERCOT with accordance to the timing of the expansion of major sections of the CREZ. A variety of empirical analyses shows a gradual transition to a well-integrated market. We also find that regional-specific shocks became more important in terms of driving price change in other regions. Specifically, the impacts of Houston (demand) and the West (wind supply) on each other and the North and South regions have increased significantly. Our study contributes to the literature by connecting the expansion of physical transmission lines with electricity market integration

Bargaining Problem of Small Farmer and Large Trader and the Model of Vertical Restraints in Indian Agriculture

The present study is in the context of the newModel Agricultural Produce Market Committee (APMC)Act 2003, which aims at freedom of farmers to sell their products to the large private firms and bringing reforms in the wholesale Cash and Carry and retail markets in India. The most important suggestions have remarked in the Economic survey 2014-15 and outlined that state governments should be especially persuaded by the central government to provide policy support for alternative or special markets in the large private sector. Many states, including West Bengal, accepted the proposal and have opened the market of agricultural commodities for the large private sector. In this paper, we study a model of vertical restraints in the case of India considering multilayer of fixed costs and monopoly power of the small as well as large traders in the vertical structure. We are also interested to find the conditions of small farmer's gain and possible strategy impacts in the cost of cultivation and consumer expenditure. Here, we first study the bargaining problem between small farmers and large traders. It has been shown that the small farmers or the producers tended to reject large traders (LT) including retailers and wholesalers as new bulk buyers. Thereafter, we consider a model of vertical restraints where, downstream firms (viz. Retail traders, Cash and Carry traders) purchase agricultural food products from the consolidators, where the consolidator buys their saleable commodities from the small farmers. We explain how the presence of the LT is affecting the wholesale market prices and retail prices. Thus we can easily understand the competition between the small and large retailers in agricultural food commodities retail market in India. Moreover, we study a model of vertical restraints in the case of India considering multilayer of fixed costs and monopoly power of the small as well as large traders in the vertical structure. We are also interested to find the conditions of small farmer's gain and possible strategy impacts in the cost of cultivation and consumer expenditure.

Consumer‐Driven Depletion of the Northern Diamondback Terrapin in Chesapeake Bay

AbstractThe northern diamondback terrapin Malaclemys terrapin terrapin was a popular food item that rose to gastronomical fame in the Chesapeake Bay region from the 1870s to 1910s. This study presents a quantitative analysis of the northern terrapin fishery by using data from historical fishery reports, contemporary newspapers, and restaurant menus to show that inflation‐adjusted prices experienced a fourfold to fivefold increase over 40 years. Wholesale market prices began declining in the early 1900s, and by the 1920s, northern diamondback terrapins were rarely listed in newspapers. Subsequently, restaurant prices began falling in the 1910s; by the late 1970s, northern diamondback terrapins were no longer listed on menus. Market declines had previously been attributed to the 1920 implementation of Prohibition (Volstead Act of 1919); however, we observed a closer relationship to the Food and Fuel Control Act of 1917. This study provides an example of an estuarine species that experienced one of the most rapid and greatest increases in price, followed by commercial extirpation in less than 40 years.

Cost Allocation and Net Load Variability

A basic principle of electricity market design is that cost allocation should follow cost causation as closely as possible. As renewable resources play a larger role in electricity generation, system operators have become increasingly concerned about costs related to variability in net load. While variable generation resources have attracted a great deal of attention along these lines, load is a larger source of variability in most systems. This paper introduces a Shapley value framework to assess the total system cost attributable to electricity market participants that either exacerbate or alleviate net load variability. Furthermore, this paper investigates the extent to which these costs are adequately reflected in wholesale market prices. Numerical tests indicate that the cost of variability on the hourly time scale is in most cases internalized by market-integrated generators and buyers, mitigating concerns that variability imposes a socialized cost from ramping or cycling of thermal generators.

Multilayer of Suppliers' Fixed Costs and the Model of Vertical Restraints

Purpose: The present study is in the context of the new Model Agricultural Produce Market Committee (APMC) Act 2003, which aims at freedom of farmers to sell their products to the large private firms and bringing reforms in the wholesale Cash and Carry and retail markets in India. The most important suggestions have remarked in the Economic survey 2014-15 and outlined that state governments should be specially persuaded by the central government to provide policy support for alternative or special markets in the large private sector. Many states, including West Bengal, accepted the proposal and have opened the market of agricultural commodities for the large private sector. This paper studies a model of vertical restraints in the case of small farmers in West Bengal, India considering multilayer of fixed costs and monopoly power of the small as well as large traders in the vertical structure. Moreover, also interested to find the conditions of small farmer's gain and possible strategy impacts on the cost of cultivation and consumer expenditure. Design/methodologies/approach: We consider a model of vertical restraints where, downstream firms (viz. Retail traders, Cash and Carry traders) purchase agricultural food products from the consolidators, where the consolidator buys their saleable commodities from the small farmers. Findings: We explain how the presence of the large trader is affecting the wholesale market prices and retail prices. Thus we can easily understand the competition between the small and large retailers in agricultural, food commodities retail market in India. Moreover, we study a model of vertical restraints in the case of India considering multilayer of fixed costs and monopoly power of the small as well as large traders in the vertical structure. We are also interested to find the conditions of small farmer's gain and possible strategy impacts on the cost of cultivation and consumer expenditure. Research limitations/implications: The current study is based on both the theory and empirical evidence. The empirical study is based on the state West Bengal, India. Practical implications: The study will help to formulate the policies related to APMC in India. Moreover, the paper identified the possible factors that are affecting negatively in the rural wholesale market and helping to create cartel and imperfection. Social Implications: The study will help to improve agricultural marketing decisions at large when we invite large traders, and that will improve the small farmers’ gain. Originality/Value: The study is based on the real field data and the model that has been built is based on that database. Therefore, the paper will help to add some value to the subject.

Economic Analysis of Electricity Storage Based on Heat Pumps and Thermal Storage Units in Large-Scale Thermal Power Plants

In this paper the financial viability of a novel storage concept, referred to as ‘integrated pumped-heat-electricity storage’, is assessed for both a coal-fired and a combined cycle (CC) power plant located in Germany, as well as for a concentrated solar power (CSP) plant located in Spain. The rationale of this concept is to use electricity during times of cheap wholesale market prices, e.g. stemming from a high supply of renewable energies, in order to generate thermal energy via a heat pump, since thermal energy can be stored at comparatively low cost. If the electricity demand rises again, the stored thermal energy is used to power a conventional water-steam cycle, thereby reducing the amount of fossil fuels used or enlarging the operating time of a CSP plant. A mixed integer linear program, considering the day-ahead wholesale market electricity prices and remunerations of offering tertiary control power in Germany, is employed to find an approximation of the optimal schedule for the generation in the power plant as well as for the purchase and the sale of electricity. The financial viability is assessed using net present value (NPV) and real options analysis. Storing electricity to profit from temporal arbitrage is found to be unprofitable, since the (conservatively estimated) costs of thermal storage units are still too high. The largest part of the revenues stems from the remunerations of offering tertiary control power. Therefore, while the utilization of heat pumps, which are estimated to have rather high costs, is not profitable, employing electric heaters without storage units is found to be economically viable for a coal-fired and a CC power plant in Germany. Here, NPV and real options analysis yield the same result, i.e. to invest immediately in such an application. In Spain, offering tertiary control power is presently not remunerated, but only the call-offs of tertiary control energy, which are not considered in the mixed integer linear program. Consequently, employing electric heaters in CSP plants in Spain is found to be not financially viable either.

Auction-theoretic analyses of the first offshore wind energy auction in Germany

The first offshore wind energy auction in Germany led to a striking result. The average award price was 0.44 ct/kWh and even more interesting, 3 out of 4 awarded projects had a strike price of 0.0 ct/kWh. That implies that those projects will only receive the actual wholesale market price for electricity as revenue. Although there has been a strong decline in costs of offshore wind projects, such a result is still surprising. We analyzed this result auction-theoretically and showed how the auction design and the market environment can explain part of the outcome. However, another aspect of the explanation is the high risk that the awarded bidders take regarding the future development of both the project costs and the wholesale market price.

Transition and Integration of the ERCOT Market with the Competitive Renewable Energy Zone Project

In this study, we seek to explore the impact of a state level transmission expansion project, the Competitive Renewable Energy Zone (CREZ), whose goal is to integrate a massive amount of wind energy, on the wholesale market prices in the Electric Council of Texas (ERCOT). We find strong evidence for price convergence across ERCOT with accordance to the timing of the expansion of major sections of the CREZ. A variety of empirical analyses shows a smooth transition to a well-integrated market. For example, Structural impulse responses suggest that a price shock after the integration takes double the time to die off compared with the before-integration period. We also find that regional-specific shocks became more important in terms of driving price change in other regions. Specifically, the impacts of Houston (demand) and the West (wind supply) on each other have increased dramatically. Our study contributes to the literature by connecting the expansion of physical transmission lines with electricity market integration.

Coordination of pumped-storage unit and irrigation system with intermittent wind generation for intelligent energy management of an agricultural microgrid

Abstract This paper presents a new coordination framework to optimize the joint operation of pumped-storage unit, irrigation system and intermittent wind power generation in an agricultural microgrid. The microgrid is an agricultural complex connected to the medium voltage network. This complex contains a farm needing water to be irrigated every day. The irrigation system has two large scale reservoirs located in different levels. These reservoirs have been planned to act as pumped-storage unit reservoirs. The microgrid contains different electrical loads such as industrial livestock, agricultural products packaging factory, drip irrigation system, lighting and other small loads. The microgrid is connected to the upstream network at the grid supply point (GSP) and supplies loads with power from the upstream network and a wind power unit located in the farm. The proposed framework optimizes day-ahead (DA) scheduling of power exchange with the upstream network, pumped-storage unit and irrigation system based on forecasted wind power, microgrid load demand and water needed for irrigation in a market environment. The two-point estimate method (TPEM) is implemented to model the uncertainties associated with wind power and wholesale market prices. Finally, the effectiveness of the proposed framework is evaluated on several case studies.