A Scenario-oriented Approach to Energy-Reserve Joint Procurement and Pricing

TL;DR

This paper introduces a scenario-based co-optimization model for energy and reserve procurement in power systems with high renewable integration, aiming to improve reliability and economic efficiency without relying on empirical reserve requirements.

Contribution

It develops a novel scenario-oriented model linking reserve needs directly to system uncertainties, and proposes new marginal pricing methods for energy and reserve that ensure cost recovery and revenue adequacy.

Findings

Optimal system-wide reserve procurement minimizes expected total costs.

Locational uniform pricing for energy and reserve is established.

Properties ensuring generator cost recovery and system revenue adequacy are proven.

Abstract

We consider some crucial problems related to the secure and reliable operation of power systems with high renewable penetrations: how much reserve should we procure, how should reserve resources distribute among different locations, and how should we price reserve and charge uncertainty sources. These issues have so far been largely addressed empirically. In this paper, we first develop a scenario-oriented energy-reserve co-optimization model, which directly connects reserve procurement with possible outages and load/renewable power fluctuations without the need for empirical reserve requirements. Accordingly, reserve can be optimally procured system-wide to handle all possible future uncertainties with the minimum expected system total cost. Based on the proposed model, marginal pricing approaches are developed for energy and reserve, respectively. Locational uniform pricing is established for energy, and the similar property is also established for the combination of reserve and re-dispatch. In addition, properties of cost recovery for generators and revenue adequacy for the system operator are also proven.