Rate-constrained Energy Services: Allocation Policies and Market Decisions

Abstract: The integration of renewable generation poses operational and economic challenges for the electricity grid. For the core problem of power balance, the legacy paradigm of tailoring supply to follow random demand may be inappropriate under deep penetration of uncertain and intermittent renewable generation. In this situation, there is an emerging consensus that the alternative approach of controlling demand to follow random supply offers compelling economic benefits in terms of reduced regulation costs. This approach exploits the flexibility of demand side resources and requires sensing, actuation, and communication infrastructure; distributed control algorithms; and viable schemes to compensate participating loads. This paper considers rate-constrained energy services which are a specific paradigm for flexible demand. These services are characterized by a specified delivery window, the total amount of energy that must be supplied over this window, and the maximum rate at which this energy may be delivered. We consider a forward market where rate-constrained energy services 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 rate-constrained services 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 rate constrained energy services.