The Architecture of Green Energy Systems: Next Steps

The electricity industry, policymakers, and regulators are grappling with decarbonizing electricity systems. Decarbonization will yield significant changes in how electricity systems are planned and operated and will require policy and market-design reforms. This talk will survey these changes as well as the major challenge of achieving the final 10%-20% of decarbonization.

Multiple market failures along with policies at federal and state levels make it difficult to predict the net systems and emissions cost impact, in both the short- and long-run, of corporate and government green power procurement strategies.  I define a suite of research questions that need to be addressed to understand whether such strategies are efficient means to reduce emissions, ineffectual, or even counter productive.   Market models are proposed, based on equilibrium and Stackelberg formulations based on optimization and complementarity methods, to address those questions.

Do low-carbon wind and solar generators need special treatment in a market where their costs have fallen to the level of conventional gas and other stations’ costs? While the level of costs may be similar, we need to take into account how cost structures and output patterns differ between renewable and dispatchable generators. While gas prices continue to determine electricity prices, renewable generators have more exposure to fuel price risk than gas-fired generators, because gas prices would affect market-based wind and solar revenues but not their costs. Appropriately structured contracts can reduce risks for generators, for energy retailers and also for electricity consumers. This presentation models the impact of different contract designs on the revenues, profits and cost of capital for renewable and dispatchable generators.

FERC Order 2222 requires ISOs to develop market mechanisms that will enable aggregators of distributed resources  to participate in the electricity wholesale market. In this work we describe the construction of a supply function for an aggregator’s virtual power plant (VPP) based on a portfolio of curtailable devices, categorized into priority tranches, that are controlled by the aggregator through edge technology behind the meter (BMT). Only the nameplate capacity of the curtailed devices are known to the aggregator while the energy yield from curtailment is uncertain. However, the supply function of the VPP offered by the aggregator into the wholesale market must specify deliverable energy quantity as function of wholesale price, like any other generator. We employ a revenue management methodology to construct a supply function with controlled delivery risk, based on priority tranches of the curtailed devices and offline estimates of the energy yield probability distributions.  This work is part of an ARPA E project aimed at implementing a VPP based on aggregated demand curtailments at PJM.