Risk-Sensitive Security-Constrained Economic Dispatch: Pricing and Algorithm Design

TL;DR

This paper introduces a risk-sensitive security-constrained economic dispatch model using CVaR, analyzes pricing schemes' revenue implications, and proposes a Benders' decomposition algorithm for efficient solution.

Contribution

It presents a novel risk-sensitive dispatch formulation with CVaR, compares pricing models' revenue properties, and develops an efficient decomposition algorithm.

Findings

System operator's revenue is nonnegative under total marginal cost pricing.

The proposed decomposition algorithm is computationally efficient.

Numerical results show differences in revenue and surplus under different pricing schemes.

Abstract

We propose a risk-sensitive security-constrained economic dispatch (R-SCED) formulation capturing the tradeoff between dispatch cost and resilience against potential line failures, where risk is modeled via the conditional value at risk (CVaR). In the context of our formulation, we analyze revenue adequacy and side payments of two pricing models, one based on nominal generation costs, and another based on total marginal cost including contingencies. In particular, we prove that the system operator's (SO) merchandising surplus (MS) and total revenue are nonnegative under the latter, while under the former the same does not hold in general. We demonstrate that the proposed R-SCED formulation is amenable to decomposition and describe a Benders' decomposition algorithm to solve it. In numerical examples, we illustrate the differences in MS and total revenue under the considered pricing schemes, and the computational efficiency of our decomposition approach.