EAGER: Renewables: Market Mechanism for Managing Uncertainties Caused by High Levels of Renewable Generation

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Renewable energy resources in electric power grids are inherently variable, and the ability to predict the variation in generated power is quite limited. This variability raises issues regarding proper pricing mechanisms for electric power in systems with high levels of renewable generation. The research objective of this project is to explore a new fundamental market-based mechanism for managing the uncertainty caused by high levels of renewable generation or renewable energy sources (RES). The key concept of the proposed mechanism is to charge uncertain sources and credit flexible sources based on Uncertainty Marginal Price (UMP), which represents the marginal cost of immunizing the next increment of uncertainty at a specific location. Management of uncertainty is one of the key issues that must be dealt with to have seamless high-level penetration of RES. The clear price signals and incentives developed in this project have the potential to remove a critical barrier to distributed RES, which in turn will promote energy independence and reduce environmental impact, contributing to the goal of a low-carbon economy. The proposed UMP concept enriches the fundamentals of electricity market theory and opens a new door for future research.This research project will, for the first time, provide explicit price signals and utilize a market mechanism to manage any level of uncertainty using a robust optimization framework. In comparison, the traditional reserve approach is based on experience and heuristics that cannot work under the high renewables scenario. The research project aims to manage uncertainty both at the source side (uncertainty reduction) and the resource side (uncertainty accommodation). UMP provides important price signals for both themarket operation and investment related to uncertainty and flexibility. In the short term, the proposed market-based mechanism provides incentives for RES operators to improve forecasting accuracy (i.e., to reduce uncertainties). It also provides incentives for existing flexible resources (e.g., gas-fired generating units) to contribute reserves for uncertainty accommodation. In the long term, the proposed mechanism provides price signals for siting new flexible resources (e.g., energy storage) to accommodate uncertainties from increasing RES penetration.