Pricing with Supply Uncertainty in Electricity Market

Pricing with Supply Uncertainty in Electricity Market

It is well known that electricity generation by RER can be intermittent and unpredictable. As a consequence, the integration of RER to power grid will introduce uncertainty into the market. On the side of industry, to enhance efficiency and reliability of electrical pow-er grid, the new concept of smart grid has emerged, where modern energy management techniques on demand side is a great challenge and attracts much attentions. To this end, many works have been done on RTP in smart grid, which can be classified into two types: those without regard to the supply uncertainty of renewable electricity, such as [11], [12]; those consider this uncertainty, such as [13], [14], [15]. [13] considers the best output strat-egy for a wind power producer and formu-lates it into a linear programming problem of moderate size. [14] considers the optimal RTP problem. The model in [15] focus the day-ahead procurement and demand response on the users’ side.Supply uncertainty of renewable electricity has a vital influence on the electricity market. A few recent works have been done on the framework of electricity market to study the behaviors of market players. [16] proposes a two-stage two-level model faced by power plant in the retail market where the power price in the wholesale market is not distin-guished and is determined from the market clearing process. [17] proposes a similar framework as ours but doesn’t go deeper the-oretically as we do. [18] develops a very de-tailed framework of two-layer agents consid-ering diverse players and market interactions as well as many kinds of uncertainty in Smart Grid, which is too complicated to make any analysis and only simulations are provided.However, as far as the authors’ knowledge, there is no existing work trying an particularly clear modeling and analysis of market dynam-ics under this uncertainty, meanwhile captur-ing all the behaviors of the dominant market players, i.e., power supplier, power plant and the vast consumers. To this end, we take a sup-ply-demand view and propose a game-theo-retical model combining the wholesale market and retail market, and investigate the pricing and investment behaviors in the wholesale market as well as the pricing behavior in the retail market. Arudhra Innovations

Contributions: Our contributions are of three-fold:●We propose a game-theoretical model cap-turing the dominant market players, i.e. generators company (supplier), consumers company (operator) and the vast consum-ers, to analysis the market dynamics under supply uncertainty.●We derive the close-form of optimal invest-ment for the operator, which is the unique equilibrium of our proposed model.●We propose an assumption to guarantee the uniqueness of equilibrium for the sup-plier-operator wholesale pricing game, and investigate the pricing relationship for wholesale and retail market, and finally give a numerical solution.The rest of this paper is organized as fol-lows: Section II introduces the market game model and the method to derive equilibrium solutions. Section III solves the decision prob-lems on the operator’s side. Section IV solves the decision problems on the energy supplier’s side. Section V discusses the solutions and analyzes them with simulation. Section VI concludes this paper

 Pricing with Supply Uncertainty in Electricity Market

In this paper, the electricity market with sup-ply uncertainty is studied theoretically in a general view. In our market model we assume three players: one electricity supplier, one electricity operator, a collection of consumers. Then we model both the wholesale market and retail market as a two-level Stackelberg game to find the market dynamic behaviors. By backward induction, we fi nd a closed-form solutions for the operator. Our conclusion is that the supply uncertainty in the market are reflected via a lower electricity price to the operator charged for USE. Furthermore, under some additional assumption on the wholesale price of USE, we find an optimal numerical solution for supplier, where the price of SSEbeing about 1.4 times higher than that of USE will benefit energy supplier optimally, and power plant’s optimal strategy of investing is to purchase USE about 4.5 times much more than SSE. https://arudhrainnovations.com/