Game-theoretic modeling of curtailment rules and network investments with distributed generation

TL;DR

This paper models curtailment rules and network investment incentives in renewable energy grids using game theory, proposing fair allocation methods and analyzing economic impacts with real UK data.

Contribution

It introduces a new fair curtailment rule and a game-theoretic model for incentivizing private network upgrades in renewable energy systems.

Findings

A new curtailment rule ensures fair distribution with minimal disruption.

Charging a transmission fee of 15%-75% of feed-in tariffs balances investment and profit.

Model validation with UK data confirms practical applicability.

Abstract

Renewable energy has achieved high penetration rates in many areas, leading to curtailment, especially if existing network infrastructure is insufficient and energy generated cannot be exported. In this context, Distribution Network Operators (DNOs) face a significant knowledge gap about how to implement curtailment rules that achieve desired operational objectives, but at the same time minimise disruption and economic losses for renewable generators. In this work, we study the properties of several curtailment rules widely used in UK renewable energy projects, and their effect on the viability of renewable generation investment. Moreover, we propose a new curtailment rule which guarantees fair allocation of curtailment amongst all generators with minimal disruption. Another key knowledge gap faced by DNOs is how to incentivise private network upgrades, especially in settings where several generators can use the same line against the payment of a transmission fee. In this work, we provide a solution to this problem by using tools from algorithmic game theory. Specifically, this setting can be modelled as a Stackelberg game between the private transmission line investor and local renewable generators, who are required to pay a transmission fee to access the line. We provide a method for computing the empirical equilibrium of this game, using a model that captures the stochastic nature of renewable energy generation and demand. Finally, we use the practical setting of a grid reinforcement project from the UK and a large dataset of wind speed measurements and demand to validate our model. We show that charging a transmission fee as a proportion of the feed-in tariff price between 15%-75% would allow both investors to implement their projects and achieve desirable distribution of the profit.