Delivering Reliable Reserve Commitments from Intermittent Electricity Resources

47 Pages Posted: 26 Aug 2024

See all articles by Anil KAYA

Anil KAYA

Karlsruhe Institute of Technology

Yashar Ghiassi-Farrokhfal

Erasmus University Rotterdam (EUR), Rotterdam School of Management (RSM), Students

Steffen Rebennack

Karlsruhe Institute of Technology

Mohammad Reza Hesamzadeh

Royal Institute of Technology (KTH)

Kai Pan

Hong Kong Polytechnic University

Derek W. Bunn

London Business School

Date Written: May 27, 2024

Abstract

Renewable Energy Producers (REPs) in electricity supply are increasing the need for flexible reserve facilities to manage their short-term intermittencies. Thus, reserve markets have become increasingly profitable. REPs may be attracted by this profitability but reserve markets require reliable commitments. It is an open question whether reliability is aligned with the profitable operations of REPs who use storage assets and/or financial hedging to manage their output reliability risks. Analyzing this question at an operational level requires a detailed analysis of the market microstructure and trading arrangements. We find that the outcomes depend on intraday market arrangements, either discrete (D-ID) auctions or continuous (C-ID) trading. We model a profit-maximizing REP's operation, with and without storage, providing reserve services via a multi-stage stochastic mixed-integer program with decision-dependent probabilities, supported by DID or C-ID trading. Using Benders decomposition and stochastic-dual-dynamic programming (SDDP), we analyze German data, which includes both C-ID and DID trading opportunities. Our findings indicate REPs could most effectively use C-ID trading for profitable and reliable reserve market participation, wherein batteries neither enhance participation nor improve system reliability. Conversely, in DID trading, REPS mostly rely on batteries for reliable, profitable participation. Accordingly, we also provide some regulatory recommendations.

Keywords: Renewable energy, electricity, reserves, storage, intraday markets, multi-stage, stochastic optimization, non-convex master problem

Suggested Citation

KAYA, Anil and Ghiassi-Farrokhfal, Yashar and Rebennack, Steffen and Hesamzadeh, Mohammad Reza and Pan, Kai and Bunn, Derek W., Delivering Reliable Reserve Commitments from Intermittent Electricity Resources (May 27, 2024). Available at SSRN: https://ssrn.com/abstract=4843369 or http://dx.doi.org/10.2139/ssrn.4843369

Anil KAYA (Contact Author)

Karlsruhe Institute of Technology ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

Yashar Ghiassi-Farrokhfal

Erasmus University Rotterdam (EUR), Rotterdam School of Management (RSM), Students ( email )

Steffen Rebennack

Karlsruhe Institute of Technology ( email )

Mohammad Reza Hesamzadeh

Royal Institute of Technology (KTH) ( email )

Kai Pan

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Derek W. Bunn

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
0207 000 8000 (Phone)

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