A system operator's utility function for the frequency response market
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Greve, T., Teng, F., Pollitt, M., & Strbac, G. (2018). A system operator's utility function for the frequency response market. Applied Energy, 231 562-569. https://doi.org/10.1016/j.apenergy.2018.09.088
How can the electricity system operator determine the optimal quantity and quality of electricity ancillary services (such as frequency response) to procure in a market increasingly characterized by intermittent renewable electricity generation? The paper presents a system operator’s utility function to calculate the exchange rates in monetary values between different frequency response products in the electricity system. We then use the utility function in a two-sided Vickrey-Clarke-Groves (VCG) mechanism combined of two frequency response products – enhanced and primary – in the context of the system in Great Britain. This mechanism would allow the market to reveal to the system operator the welfare optimal mix of speed of frequency response and quantity to procure. We show that this mechanism is the efficient way to support new faster sources of frequency response, such as could be provided by grid scale batteries.
The authors acknowledge the financial support of the EPSRC Business, Economics, Planning and Policy for Energy Storage in Low-Carbon Futures (BEPP-Store) project (Grant No. EP/L014386/1).
Engineering and Physical Sciences Research Council (EP/L014386/1)
External DOI: https://doi.org/10.1016/j.apenergy.2018.09.088
This record's URL: https://www.repository.cam.ac.uk/handle/1810/286430