TILEC Work In Progress: Dongchen He
Co-optimization of Energy and Reserves: Flexibility and Uncertainty in Electricity Markets
This paper studies power planning, taking into account two important characteristics in electricity markets: inflexibility and uncertainty. Demand and supply are both uncertain. Part of consumers are on the conventional meter and cannot react to real-time price. Production is not fully flexible so adjusting quantity upwards or downwards is costly. Especially, to increase production is not possible without standby. The main results show that if expected demand (supply availability) is low (high), reserves by flexible technologies are more cost-effective. Demand-side elasticity reduces the value of standby if rationing can be done efficiently. Supply availability and prediction accuracy mitigate the problem from production inflexibility. Finally, this paper proposes a new measure of levelized cost of energy, in which inflexibility and correlation between uncertainty and real-time price are incorporated.
Speaker: Dongchen He
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