Coordination of renewable energy and flexible loads in electricity markets via financial tools

Abstract

Flexible energy usage is an important property of many loads. Power systems can achieve better social welfare from their flexibility. Besides, flexible loads are also a choice to offset the fluctuation in the power system from renewable energy, e.g. wind and solar. Since they are affected by enormous uncertain factors, it is still a challenge to predicate their power outputs accurately especially when the prediction executes several hours earlier. For example, the wind prediction at one day ahead may be far away from the real-time measurement. This prediction error can be counteracted by changing the schedules of flexible loads in real-time scheduling. Electricity market is a promising platform to coordinate the schedules of wind and flexible loads through financial tools. That is, flexible loads can receive incentive by providing flexibility to renewable resources under market rules, and renewable resources will hedge their prediction error by this flexibility. We outline a multi-settlement electricity market architecture to enable flexibility trading and propose a mechanism to mitigate the volatility risk by using energy options and financial rights under the proposed architecture. A trading sample and an IEEE benchmark system demonstrate the effectiveness of the proposed hedging mechanism.