Rate-Constrained Energy Services in Electricity

Abstract

The integration of renewable generation poses operational and economic challenges for the grid. For the problem of power balance, the legacy paradigm of tailoring supply to follow demand may be inappropriate under deep penetration of renewable generation. In this situation, the alternative approach of controlling demand to follow supply offers compelling benefits in terms of reduced regulation costs. This paper considers rate-constrained energy services (RCESs) which are a specific paradigm for flexible demand. These services are characterized by a delivery window, the total amount of energy that must be supplied, and the maximum rate at which this energy may be delivered. We consider a forward market where RCES are traded. We explore allocation policies and market decisions of a supplier in this market. The supplier owns a generation mix that includes some uncertain renewable generation and may also purchase energy in day-ahead and real-time markets to meet customer demand. The supplier must optimally select the portfolio of RCES to sell, the amount of day-ahead energy to buy, and the policies for making real-time energy purchases and allocations to customers to maximize its expected profit. We offer solutions to the supplier's decision and control problems to economically provide RCES. We provide numerical results illustrating our finds.