A Swing-Contract Market Design for Flexible Service Provision in Electric Power Systems [chapter]

Wanning Li, Leigh Tesfatsion
2018 IMA Volumes in Mathematics and its Applications  
The need for flexible service provision in electric power systems has dramatically increased due to the growing penetration of variable energy resources, as has the need to ensure fair access and compensation for this provision. A swing contract (SC) facilitates flexible service provision because it permits multiple service attributes to be offered together in bundled form with each attribute expressed as a range of possible values rather than as a single point value. This paper discusses a new
more » ... SC Market Design for electric power systems that permits SCs to be offered by any dispatchable resource. An analytical optimization formulation is developed for the clearing of an SC day-ahead market that can be implemented using any standard mixed integer linear programming (MILP) solver. The practical feasibility of the optimization formulation is demonstrated by means of a numerical example. Abstract The need for flexible service provision in electric power systems has dramatically increased due to the growing penetration of variable energy resources, as has the need to ensure fair access and compensation for this provision. A swing contract facilitates flexible service provision with appropriate compensation because it permits multiple services to be offered together in bundled form with each service expressed as a range of possible values rather than as a single point value. This paper discusses a new swing-contract market design for electric power systems that permits swing contracts to be offered by any dispatchable resource. An analytical optimization formulation is developed for the clearing of a swing-contract day-ahead market that can be implemented using any standard mixed integer linear programming solver. The practical feasibility of the optimization formulation is demonstrated by means of a numerical example. 1 2 Wanning Li and Leigh Tesfatsion In consequence, flexibility in ancillary service provision has become increasingly important to maintain the reliability and efficiency of power system operations. This has encouraged power system operators to introduce new products and market processes designed to permit more flexibility in ancillary service provision, thus enhancing net load following capability [13] . Nevertheless, three important issues arising from increased VER penetration still need to be resolved. First, power and reserve products are variously defined and compensated across the different energy regions; see, e.g., [11] . This lack of standardization makes it difficult to compare and evaluate the reliability, efficiency,and fairness of system operations across these regions. Second, product definitions are specified in broad rigid terms (e.g., capacity, energy, ramp-rate, regulation, non-spinning reserve). These rigid categorizations do not permit resources to be further differentiated and compensated on the basis of additional valuable flexibility in service provision, such as an ability to ramp up and down between minimum and maximum values over very short time intervals. Moreover, the valued services provided by energy resources in power systems largely arise from one source: generated power paths. Since the attributes of power paths are highly correlated, attempts to unbundle these attributes into separately defined and priced products are conceptually problematic. For example, how can "ramp-rate" be properly valued apart from a consideration of other power path attributes, such as start time, duration, and power range? Third, attempts to accommodate new products have led to the introduction of out-of-market (OOM) compensation processes. In 2011 the U.S. Federal Energy Regulatory Commission (FERC) issued Order 755 to address OOM payment problems for one particular product category in U.S. centrally-managed wholesale power markets: namely, regulation with different abilities to follow electronic dispatch signals with high accuracy [12] . However, given its limited scope, Order 755 does not fully eliminate the need in these markets to resort to OOM processes. As stressed in [4], the additional complexity resulting from OOM compensation processes provides increased opportunities for market participants to gain unfair profit advantages through strategic behaviors. A group of researchers has been working to develop a new swing-contract market design for electric power systems that permits greater flexibility in service provision while at the same time addressing the above three issues [15, 22] . This work builds on important earlier work [2, 3, 8, 19 ] that stresses the relevance of options and two-part pricing contracts for electricity transactions. The swing contract (SC) proposed in [15, 22] permits a resource with dispatchable power to offer into an electric power market a collection of available power paths with a wide range of specified services, such as start-location, start-time, power level, ramp rate, duration, and volt/VAr support. Each of these services can be offered as a range of values rather than as a point value, thus permitting greater flexibility in real-time implementation to meet both power and reserve needs. Moreover, permitting the resource to offer its services into the market in bundled form, as a collection of available power paths, helps to ensure that all of its valued services receive appropriate compensation. Simple examples are used in [15, 22] to illustrate how the trading of SCs could be supported by a sequence of linked centrally-managed forward markets in a manner that permits efficient real-time balancing of net load subject to system and reserverequirement constraints. In comparison with existing wholesale electric power market designs, the following key policy implications of this SC market design are highlighted. • permits full market-based compensation for availability and performance • facilitates a level playing field for market participation • facilitates co-optimization of power and reserve markets • supports forward-market trading of power and reserve • permits service providers to offer flexible service availability • provides system operators with real-time flexibility in service usage • facilitates accurate load forecasting and following of dispatch signals • permits resources to internally manage unit commitment and capacity constraints • permits the robust-control management of uncertain net load • eliminates the need for out-of-market payment adjustments • reduces the complexity of market rules
doi:10.1007/978-1-4939-7822-9_5 fatcat:4bwad5ri35dftmsnw2ebhemnyq