Uncertainty-Informed Renewable Energy Scheduling: A Scalable Bilevel Framework

TL;DR

This paper introduces a scalable bilevel optimization framework for integrating variable renewable energy sources into electricity markets, reducing costs and volatility at high penetration levels by optimizing bid strategies.

Contribution

It develops a novel linear relaxation technique for large-scale bilevel problems, enabling efficient renewable energy scheduling in complex power systems.

Findings

Significant cost reduction at 40% VRES penetration

Lower market-price volatility with the proposed framework

Robustness to increased transmission capacity

Abstract

This work proposes an uncertainty-informed bid adjustment framework for integrating variable renewable energy sources (VRES) into electricity markets. This framework adopts a bilevel model to compute the optimal VRES day-ahead bids. It aims to minimize the expected system cost across day-ahead and real-time stages and approximate the cost efficiency of the stochastic market design. However, solving the bilevel optimization problem is computationally challenging for large-scale systems. To overcome this challenge, we introduce a novel technique based on strong duality and McCormick envelopes, which relaxes the problem to a linear program, enabling large-scale applications. The proposed bilevel framework is applied to the 1576-bus NYISO system and benchmarked against a myopic strategy, where the VRES bid is the mean value of the probabilistic power forecast. Results demonstrate that, under high VRES penetration levels (e.g., 40%), our framework can significantly reduce system costs and market-price volatility, by optimizing VRES quantities efficiently in the day-ahead market. Furthermore, we find that when transmission capacity increases, the proposed bilevel model will still reduce the system cost, whereas the myopic strategy may incur a much higher cost due to over-scheduling of VRES in the day-ahead market and the lack of flexible conventional generators in real time.