A Capacity-Price Game for Uncertain Renewables Resources

TL;DR

This paper analyzes a capacity-price game for renewable resources, showing that inherent randomness leads to efficient equilibria as the number of players increases, contrasting with traditional deterministic models.

Contribution

It demonstrates that the randomness in renewable resources causes the decentralized game to become efficient with many players, aligning with centralized social planning outcomes.

Findings

Equilibria become efficient as the number of renewable producers grows.

Randomness in renewables improves resource planning and market outcomes.

Simulation validates theoretical results with real-world data.

Abstract

Renewable resources are starting to constitute a growing portion of the total generation mix of the power system. A key difference between renewables and traditional generators is that many renewable resources are managed by individuals, especially in the distribution system. In this paper, we study the capacity investment and pricing problem, where multiple renewable producers compete in a decentralized market. It is known that most deterministic capacity games tend to result in very inefficient equilibria, even when there are a large number of similar players. In contrast, we show that due to the inherent randomness of renewable resources, the equilibria in our capacity game becomes efficient as the number of players grows and coincides with the centralized decision from the social planner's problem. This result provides a new perspective on how to look at the positive influence of randomness in a game framework as well as its contribution to resource planning, scheduling, and bidding. We validate our results by simulation studies using real world data.