Calibration of Operating Reserve Demand Curves using Monte Carlo Simulations

Abstract

Scarcity pricing has been proposed to enhance investment in flexible assets through the use of an adder on real-time energy and the application of that adder on real-time reserve. We implement a Monte-Carlo simulator for obtaining statistically confident estimates of scarcity pricing adders which is motivated from the implementation of this mechanism in Belgium. The analysis is based on a multi-level, multi-horizon simulation of day-ahead and real-time operations in the Belgian market. The methodology relies on k-means clustering for selecting a set of representative day-ahead forecasts, followed by the generation of synthetic real-time load scenarios for simulating real-time operations.