Abstract
In this paper, we first present a market environment with a conventional two settlement mechanism. We show that when we add some wind generation to the system, the steady-state market conditions yield lower social and consumer welfare and higher use of fossil fuels. We also present results of a counterfactual stochastic settlement market which improves social and consumer welfare after the introduction of new intermittent generation. Thus, we conclude that the choice of market mechanism is a critical factor for capturing the benefits of large-scale wind integration.
We also introduce a method to compute analytical equilibria of games in which the payoff functions of players depend on the optimal solution to an optimization problem with inequality constraints.
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Notes
Wind generation may not always be the price taker in reality. For example, an ISO with unit commitment considerations may dispatch wind generators less than their available output.
One can choose these parameters so that there is no e that would lead to such counter-intuitive results.
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Khazaei, J., Downward, A. & Zakeri, G. Modelling counter-intuitive effects on cost and air pollution from intermittent generation. Ann Oper Res 222, 389–418 (2014). https://doi.org/10.1007/s10479-012-1281-4
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DOI: https://doi.org/10.1007/s10479-012-1281-4