Title: Electricity market design for generator revenue sufficiency with increased variable generation

Abstract

Here, we present a computationally efficient mixed-integer program (MIP) that determines optimal generator expansion decisions, and hourly unit commitment and dispatch in a power system. The impact of increasing wind power capacity on the optimal generation mix and generator profitability is analyzed for a test case that approximates the electricity market in Texas (ERCOT). We analyze three market policies that may support resource adequacy: Operating Reserve Demand Curves (ORDC), Fixed Reserve Scarcity Prices (FRSP) and fixed capacity payments (CP). Optimal expansion plans are comparable between the ORDC and FRSP implementations, while capacity payments may result in additional new capacity. The FRSP policy leads to frequent reserves scarcity events and corresponding price spikes, while the ORDC implementation results in more continuous energy prices. Average energy prices decrease with increasing wind penetration under all policies, as do revenues for baseload and wind generators. Intermediate and peak load plants benefit from higher reserve prices and are less exposed to reduced energy prices. All else equal, an ORDC approach may be preferred to FRSP as it results in similar expansion and revenues with less extreme energy prices. A fixed CP leads to additional new flexible NGCT units, but lower profits for other technologies.

Authors:

Levin, Todd ^[1]; Botterud, Audun ^[1]

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+ Show Author Affiliations

1. Argonne National Lab. (ANL), Lemont, IL (United States)

Publication Date:

Thu Oct 01 00:00:00 EDT 2015

Research Org.:

Argonne National Laboratory (ANL), Argonne, IL (United States)

Sponsoring Org.:

USDOE Office of Energy Efficiency and Renewable Energy (EERE)

OSTI Identifier:

1236951

Alternate Identifier(s):

OSTI ID: 1247814

Grant/Contract Number:  

AC02-06CH11357

Resource Type:

Accepted Manuscript

Journal Name:

Energy Policy

Additional Journal Information:

Journal Volume: 87; Journal Issue: C; Journal ID: ISSN 0301-4215

Publisher:

Elsevier

Country of Publication:

United States

Language:

English

Subject:

32 ENERGY CONSERVATION, CONSUMPTION, AND UTILIZATION; ERCOT; ORDC; Resource Adequacy; Revenue Sufficiency; Scarcity Pricing; Variable Energy Resources; Operating reserve demand curve; Scarcity pricing