Day-Ahead Versus Intraday Valuation of Demand-Side Flexibility for Photovoltaic and Wind Power Systems
FCN Working Paper No. 17/2014
38 Pages Posted: 28 Jan 2015
Date Written: November 1, 2014
This paper explores the economic benefits that wind and photovoltaic power plant operators can extract from the activation of flexible loads during their market operations. We compare two alternatives: (1) use of flexible loads to maximize relative day-ahead market value by shifting the portfolio balance in view of day-ahead price developments; (2) use of flexible loads in intraday operations to minimize the costs incurred when balancing forecast errors. We find that the latter option yields greater value than the former, both from an analytical and a market data perspective. On these grounds, we propose a model to shift loads before trading production forecast errors in continuous-trade intraday markets under uncertainty. In an illustrative example, the model is applied to simulate the trade operations of a small-scale wind power operator in the German power market with access to a limited pool of flexible loads in the household segment. The simulation demonstrates that demand-side flexibility can yield significant cost reductions; the extent is influenced by the volatility of prices and the time spans across which loads can be shifted.
Suggested Citation: Suggested Citation