Who Should Pay for the Mileage Payment?

Abstract

To tackle the challenges brought by the renewable’s stochastic nature, activities have been picked up: FERC order 755 requires ISOs to introduce mileage payment to frequency regulation providers for more reliable and high quality services. This payment is currently being collected from the ISOs despite the fact that it is not ISOs who cause this extra payment. Therefore, we submit that it is time to reconsider a fair cost allocation. In particular, we study the impact of introducing the corresponding ‘mileage cost’ to the renewables for causing fluctuations in the system. We start by formulating the problem with perfect forecasting for an infinite horizon. Then, we investigate the role of information by restricting our knowledge within a window, i.e., the Model Predictive Control (MPC) approach. We prove that the MPC approach can achieve near optimal performance and further characterize the performance guarantee. Finally, we propose a hierarchical control approach to initiate the discussion on sharing, coordination, and privacy.