Optimal energy sharing for renewable portfolio standard and carbon cap-and-trade scheme: A two-step energy trading approach

Abstract

Based on the renewable portfolio standard and carbon cap-and-trade scheme, consumers faced with the demand of power and carbon emission permits shall be able to participate in three markets, i.e., green power market, electricity market and carbon market. In this paper, we propose a two-step energy trading approach to help consumers optimize their utility, considering the conflict of interest regarding whether to purchase power from the aforementioned three markets and how much power to purchase from each market. This approach takes into account several factors, including the benefits of participating in demand response, the costs associated with consumer dissatisfaction, the costs of power purchased from the electricity market, the costs of renewable power purchased from the green power market, and the costs of carbon emission permits purchased from the carbon market. The two-step formulation establishes an equilibrium problem with equilibrium constraints. A chance-constrained optimization method is utilized due to the uncertain fluctuation of renewable power in the two steps. The equilibrium problem with equilibrium constraints in the two steps can be settled by the nonlinear optimization of multiple subproblems with corresponding Karush-Kuhn-Tucker conditions. Simulations show that the proposed approach is able to significantly improve the utility of the consumers in the energy trading process among green power, electricity and carbon markets.