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Energy Procurement Strategies in the Presence of Intermittent Sources

Nair, Jayakrishnan and Adlakha, Sachin and Wierman, Adam (2014) Energy Procurement Strategies in the Presence of Intermittent Sources. ACM SIGMETRICS Performance Evaluation Review, 42 (1). pp. 85-97. ISSN 0163-5999.

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The increasing penetration of intermittent, unpredictable renewable energy sources such as wind energy, poses significant challenges for utility companies trying to incorporate renewable energy in their portfolio. In this work, we study the problem of conventional energy procurement in the presence of intermittent renewable resources. We model the problem as a variant of the newsvendor problem, in which the presence of renewable resources induces supply side uncertainty, and in which conventional energy may be procured in three stages to balance supply and demand. We compute closed-form expressions for the optimal energy procurement strategy and study the impact of increasing renewable penetration, and of proposed changes to the structure of electricity markets. We explicitly characterize the impact of a growing renewable penetration on the procurement policy by considering a scaling regime that models the aggregation of unpredictable renewable sources. A key insight from our results is that there is a separation between the impact of the stochastic nature of this aggregation, and the impact of market structure and forecast accuracy. Additionally, we study the impact on procurement of two proposed changes to the market structure: the addition and the placement of an intermediate market. We show that addition of an intermediate market does not necessarily increase the efficiency of utilization of renewable sources. Further, we show that the optimal placement of the intermediate market is insensitive to the level of renewable penetration.

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Additional Information:© 2014 ACM. The authors gratefully acknowledge the support of the NSF through grant CNS 0846025 and NetSE grant CNS 0911041, the ARO through MURI grant W911NF-08-1-0233, and Bell Labs, Alcatel-Lucent. The first author also acknowledges support from an NWO VIDI grant.
Funding AgencyGrant Number
NSFCNS 0846025
NSF NetSECNS 0911041
Army Research Office (ARO) Multidisciplinary University Research Initiative (MURI)W911NF-08-1-0233
Nederlandse Organisatie voor Wetenschappelijk Onderzoek (NWO)UNSPECIFIED
Issue or Number:1
Record Number:CaltechAUTHORS:20140804-132430669
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Official Citation:Energy procurement strategies in the presence of intermittent sources Jayakrishnan Nair, Sachin Adlakha, Adam Wierman Pages: 85-97 doi>10.1145/2637364.2591982
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:47910
Deposited By: Ruth Sustaita
Deposited On:04 Aug 2014 20:46
Last Modified:03 Oct 2019 06:58

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