Facilitating appropriate compensation of electric energy and reserve through standardized contracts with swing

Abstract

Three key issues have arisen for centrally-managed wholesale electric power markets in Europe and the United States as they attempt to handle an increased penetration of variable energy resources. First, rigid definitions for energy and reserve products make it difficult to ensure appropriate compensation for important needed flexibility in start-up times, ramp-rates, power dispatch levels, and duration. Second, participation restrictions hinder the achievement of an even playing field for potential providers of flexible services. Third, reliance on out-of-market compensation for the provision of some valued services encourages strategic manipulation. This study examines the possibility of addressing these three issues through the introduction of standardized energy and reserve contracts with swing (flexibility) in their contractual terms. Concrete examples are used to demonstrate how the trading of these standardized contracts can be supported by linked forward markets in a manner that permits efficient real-time balancing of net load subject to system and reserve-requirement constraints. Comparisons with existing wholesale electric power markets are given, and key policy implications are highlighted.

A Swing-Contract Market Design for Flexible Service Provision in Electric Power Systems

“…Four types of contracts are proposed in [15] to facilitate power and reserve trading: namely, firm contracts and option contracts taking either a fixed or swing form. A firm contract (FC) imposes specific obligations on the buyer and seller regarding how the buyer will procure services from the seller in accordance with contractually specified terms.…”

“…A group of researchers has been working to develop a new swing-contract market design for electric power systems that permits greater flexibility in service provision while at the same time addressing the above three issues [15,22]. This work builds on important earlier work [2,3,8,19] that stresses the relevance of options and two-part pricing contracts for electricity transactions.…”

“…The swing contract (SC) proposed in [15,22] permits a resource with dispatchable power to offer into an electric power market a collection of available power paths with a wide range of specified services, such as start-location, start-time, power level, ramp rate, duration, and volt/VAr support. Each of these services can be offered as a range of values rather than as a point value, thus permitting greater flexibility in real-time implementation to meet both power and reserve needs.…”

“…Simple examples are used in [15,22] to illustrate how the trading of SCs could be supported by a sequence of linked centrally-managed forward markets in a manner that permits efficient real-time balancing of net load subject to system and reserverequirement constraints. In comparison with existing wholesale electric power market designs, the following key policy implications of this SC market design are highlighted.…”

Distributed Bilevel Energy Allocation Mechanism With Grid Constraints and Hidden User Information

“…HE proliferation of renewable energy resources (RES) at the distribution level is reshaping the market structure of distribution system operators (DSO). The electricity sector has devolved from a highly regulated system operated by vertically integrated utilities to a relatively decentralized system based more fully on market valuation and allocation mechanisms [1]. A RES owner with a surplus of energy is anticipated to participate in such mechanisms more strategically while seeking profit [2], [3].…”