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Impact of High levels of Wind Penetration on the Exercise of Market Power in the Multi-Area Systems
KTH, School of Electrical Engineering (EES), Electric Power Systems. (Electricity Market Research Group (EMReG))ORCID iD: 0000-0002-6973-3726
2017 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

New European energy policies have set a goal of a high share of renewable energy in electricity markets. In the presence of high levels of renewable generation, and especially wind, there is more uncertainty in the supply. It is natural, that volatility in energy production induces the volatility in energy prices. This can create incentives for the generators to exercise market power by traditional means: withholding the output by conventional generators, bidding not the true marginal costs, or using locational market power. In addition, a new type of market power has been recently observed: exercise of market power on ramp rate. This dissertation focuses on modeling the exercise of market power in power systems with high penetration of wind power. The models consider a single, or multiple profit-maximizing generators. Flexibility is identified as one of the major issues in wind-integrated power systems. Therefore, part of the research studies the behavior of strategic hydropower producers as main providers of flexibility in systems, where hydropower is available.Developed models are formulated as mathematical and equilibrium problems with equilibrium constraints (MPECs and EPECs). The models are recast as mixed-integer linear programs (MILPs) using discretization. Resulting MILPs can be solved directly by commercially-available MILP solvers, or by applying decomposition. Proposed Modified Benders Decomposition Algorithm (MBDA) significantly improves the computational efficiency.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2017. , p. 95
Series
TRITA 2017:047, ISSN 1653-5146
Keywords [en]
wind integration, market power, game theory, mathematical programming
National Category
Other Electrical Engineering, Electronic Engineering, Information Engineering
Research subject
Electrical Engineering
Identifiers
URN: urn:nbn:se:kth:diva-207090ISBN: 978-91-7729-434-4 (print)OAI: oai:DiVA.org:kth-207090DiVA, id: diva2:1095710
Public defence
2017-06-13, Kollegiesalen, Brinellvägen 8, Stockholm, 10:00 (English)
Opponent
Supervisors
Note

QC 20170516

Available from: 2017-05-16 Created: 2017-05-15 Last updated: 2017-06-13Bibliographically approved
List of papers
1. Exercise of Market Power on Ramp Rate in Wind-Integrated Power Systems
Open this publication in new window or tab >>Exercise of Market Power on Ramp Rate in Wind-Integrated Power Systems
2015 (English)In: IEEE Transactions on Power Systems, ISSN 0885-8950, E-ISSN 1558-0679, Vol. 30, no 3, p. 1614-1623Article in journal (Refereed) Published
Abstract [en]

With an increasing penetration of wind power, there is likely to be an increasing need for fast-ramping generating units. These generators ensure that no load is lost if supply drops due to the uncertainties in wind power generation. However, it is observed in practice that, in a presence of network constraints, fast-ramping generating units are prone to act strategically and exercise market power by withholding their ramp rates. In this paper we model this gaming behavior on ramp rates. We assume a market operator who collects bids in form of marginal costs, quantities, and ramp rates. He runs a ramp-constrained economic dispatch given the generators' bids, forecasted demand, and contingencies. Following the game-theoretic concepts, we set up a multi-level optimization problem. The lower-level problem is the ramp-constrained economic dispatch and the higher-level represents the profit maximization problems solved by strategic generators. The whole problem is formulated as an equilibrium problem with equilibrium constraints (EPEC). The outcome of the EPEC problem is a set of Nash equilibria. To tackle the multiple Nash equilibria problem, the concept of the extremal-Nash equilibria is defined and formulated. We model the concept of extremal-Nash equilibria as a single-stage mixed-integer linear programming problem (MILP) and demonstrate the application of this mathematical framework on an illustrative case and on a more realistic case study with tractable results.

National Category
Energy Systems
Research subject
Electrical Engineering
Identifiers
urn:nbn:se:kth:diva-165341 (URN)10.1109/TPWRS.2014.2356255 (DOI)000353641000053 ()2-s2.0-84928522523 (Scopus ID)
Note

QC 20150513

Available from: 2015-04-27 Created: 2015-04-27 Last updated: 2017-12-04Bibliographically approved
2. Generation Flexibility in Ramp Rates: Strategic Behavior and Lessons for Electricity Market Design
Open this publication in new window or tab >>Generation Flexibility in Ramp Rates: Strategic Behavior and Lessons for Electricity Market Design
2017 (English)In: European Journal of Operational Research, ISSN 0377-2217, E-ISSN 1872-6860, Vol. 261, no 2, p. 755-771Article in journal (Refereed) Published
Abstract [en]

A ramp rate usually defines the speed at which an electric power producer can decrease or increase its production in limited time. The availability of fast-ramping generators significantly affects the economic dispatch, especially in the systems with high penetration of intermittent energy sources, e.g. wind power, since the fluctuations in supply are common and sometimes unpredictable. One of the regulatory practices of how to impel generators to provide their true ramp rates is to separate the stages of submitting the bids on ramp rate and production. In this paper we distinguish two types of market structures: one-stage – when electric power producers are deciding their production and ramp rate at the same time, or two-stage – when generators decide their ramp rate first, and choose their production levels at the second stage. We employ one-stage and two-stage equilibrium models respectively to represent these market setups and use a conjectured price response parameter ranging from perfect competition to the Cournot oligopoly to investigate the effect of the market competition structure on the strategic decisions of the generators. We compare these two market setups in a symmetric duopoly case with two time periods and prove that in the two-stage market setup the level of ramp rate is independent of the strategic behavior in the spot market and generally lower than the one offered in the one-stage setup. We also show that the ramp-rate levels in one- and two-stage models coincide at the Cournot oligopoly. We extend the model to asymmetry, several load periods, portfolio bidding, and uncertainty, and show that withholding the ramp rate still occurs in both models. Our findings prove that market regulators cannot rely on only separating the decision stages as an effective measure to mitigate market power and in certain cases it may lead to an adverse effect.

Place, publisher, year, edition, pages
Elsevier, 2017
Keywords
OR in energy, Ramp rate, Strategic decision-making, Bilevel programming, Equilibrium problems
National Category
Other Electrical Engineering, Electronic Engineering, Information Engineering
Research subject
Energy Technology
Identifiers
urn:nbn:se:kth:diva-203802 (URN)10.1016/j.ejor.2017.02.028 (DOI)000401206300028 ()2-s2.0-85014684150 (Scopus ID)
Note

QC 20170405

Available from: 2017-03-17 Created: 2017-03-17 Last updated: 2017-06-15Bibliographically approved
3. Strategic Bidding of a Hydropower Producer under Uncertainty: Modified Benders Approach
Open this publication in new window or tab >>Strategic Bidding of a Hydropower Producer under Uncertainty: Modified Benders Approach
2018 (English)In: IEEE Transactions on Power Systems, ISSN 0885-8950, E-ISSN 1558-0679, Vol. 33, no 1, p. 861-873Article in journal (Refereed) Published
Abstract [en]

This paper proposes a stochastic bilevel program for strategic bidding of a hydropower producer. The price, quantity and ramp-rate bids are considered. The uncertainty of wind power generation, variation of inflows for the hydropower producer, and demand variability are modeled through the moment-matching scenario generation technique. Using discretization the stochastic bilevel program is reformulated as a stochastic mixed-integer linear program (MILP) with disjunctive constraints. We propose a modified Benders decomposition algorithm (MBDA), which fully exploits the disjunctive structure of reformatted MILP model. More importantly, the MBDA does not require optimal tuning of disjunctive parameters and it can be efficiently parallelized. Through an illustrative 5-node example, we identify possible strategies (specific to a hydropower producer) for maximizing profit, which in turn leads to market insights. We also use the IEEE 24-node, 118-node, and 300-node case studies to show how our parallelized MBDA outperforms the standard benders decomposition algorithm. The parallelized MBDA is also compared to the state-of-the-art CPLEX solver.

Place, publisher, year, edition, pages
Institute of Electrical and Electronics Engineers (IEEE), 2018
Keywords
Disjunctive constraint, modified benders decomposition algorithm, stochastic bilevel program
National Category
Other Electrical Engineering, Electronic Engineering, Information Engineering
Identifiers
urn:nbn:se:kth:diva-207089 (URN)10.1109/TPWRS.2017.2696058 (DOI)000418776400076 ()
Note

QC 20170519

Available from: 2017-05-15 Created: 2017-05-15 Last updated: 2018-01-17Bibliographically approved
4. Nash Equilibria in Hydro-Dominated Systems under Uncertainty: Modified Benders Approach
Open this publication in new window or tab >>Nash Equilibria in Hydro-Dominated Systems under Uncertainty: Modified Benders Approach
2017 (English)Article in journal (Refereed) Submitted
National Category
Other Electrical Engineering, Electronic Engineering, Information Engineering
Identifiers
urn:nbn:se:kth:diva-207091 (URN)
Note

QC 20170519

Available from: 2017-05-15 Created: 2017-05-15 Last updated: 2017-05-19Bibliographically approved

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