Duration-differentiated Energy Services with a Continuum of Loads

TL;DR

This paper explores how flexible loads requiring fixed durations of power can be managed with variable renewable energy sources, proposing a market framework to optimize welfare and allocate power efficiently.

Contribution

It introduces a model for duration-differentiated loads, providing conditions for supply adequacy, and compares market mechanisms for managing flexibility.

Findings

Conditions for supply adequacy to meet flexible loads

A welfare-maximizing allocation method

Comparison of forward and spot markets in flexibility management

Abstract

As the proportion of total power supplied by renewable sources increases, it gets more costly to use reserve generation to compensate for the variability of renewables like solar and wind. Hence attention has been drawn to exploiting flexibility in demand as a substitute for reserve generation. Flexibility has different attributes. In this paper we consider loads requiring a constant power for a specified duration (within say one day), whose flexibility resides in the fact that power may be delivered at any time so long as the total duration of service equals the load's specified duration. We give conditions under which a variable power supply is adequate to meet these flexible loads, and describe how to allocate the power to the loads. We also characterize the additional power needed when the supply is inadequate. We study the problem of allocating the available power to loads to maximize welfare, and show that the welfare optimum can be sustained as a competitive equilibrium in a forward market in which electricity is sold as service contracts differentiated by the duration of service and power level. We compare this forward market with a spot market in their ability to capture the flexiblity inherent in duration-differentiated loads.