CVaR Constrained Planning of Renewable Generation with Consideration of System Inertial Response, Reserve Services and Demand Participation

54 Pages Posted: 27 Feb 2019

See all articles by Andrés Inzunza

Andrés Inzunza

University of Chile

Rodrigo Moreno

Imperial College London

Alejandro Bernales

Universidad de Chile

Hugh Rudnick

Pontifical Catholic University of Chile - School of Engineering

Date Written: June 17, 2016

Abstract

Integration of renewable generation can lead to both diversification of energy sources (which can improve the overall economic performance of the power sector) and cost increase due to the need for further resources to provide flexibility and thus secure operation from unpredictable, variable and asynchronous generation. In this context, we propose a cost-risk model that can properly plan generation and determine efficient technology portfolios through balancing the benefits of energy source diversification and cost of security of supply through provision of various generation frequency control and demand side services, including preservation of system inertia levels. We do so through a scenario-based cost minimization framework where the conditional value at risk (CVaR), associated with costs under extreme scenarios of fossil fuel prices combined with hydrological inflows, is constrained. The model can tackle problems with large data sets (e.g. 8760 hours and 1000 scenarios) since we use linear programming and propose a Benders-based method adapted to deal with CVaR constraints in the master problem. Through several analyses, including the Chilean main electricity system, we demonstrate the effects of renewables on hedging both fossil fuel and hydrological risks; effects of security of supply on costs, risks and renewable investment; and the importance of demand side services in limiting risk exposure of generation portfolios through encouraging risk mitigating renewable generation investment.

Keywords: Mean-Risk Electricity Generation Investment, Generation Technologies Portfolios, Frequency Response and Reserves, Power System Economics, Power System Security

JEL Classification: G11, L94, Q40, C60, D81

Suggested Citation

Inzunza, Andrés and Moreno, Rodrigo and Bernales, Alejandro and Rudnick, Hugh, CVaR Constrained Planning of Renewable Generation with Consideration of System Inertial Response, Reserve Services and Demand Participation (June 17, 2016). Available at SSRN: https://ssrn.com/abstract=3336254 or http://dx.doi.org/10.2139/ssrn.3336254

Andrés Inzunza

University of Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421
Chile

Rodrigo Moreno (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Alejandro Bernales

Universidad de Chile ( email )

Diagonal Paraguay 257
Santiago
Chile

HOME PAGE: http://www.alejandrobernales.com

Hugh Rudnick

Pontifical Catholic University of Chile - School of Engineering

Casilla 306
Correo 22
Santiago
Chile

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