1 KEY ENERGY MANAGEMENT ISSUES OF SETTING MARKET CLEARING PRICE (MCP) IN MICRO-GRID SCENARIO A.K.Basu (1) , T.K.Panigrahi (1) , S.Chowdhury (2) , S.P.Chowdhury (1) , N.Chakraborty (1) A.Sinha (3) and Y.H.Song (4) (1) Jadavpur University, India (2) Women’s Polytechnic, India (3) Tata Consultancy Services Ltd., India (4) Liverpool University, UK ABSTRACT Micro grid is an epitome of a macro grid but works in low voltage comprising of various small-distributed energy resources (DERs), energy storage devices, and controllable loads being interfaced through fast acting power electronic devices. Combined heat and power (CHP) produced by DERs are utilized in the local market where Micro Grid operates either in island mode or in grid-connected mode. The CHP mode of operation makes the Micro Grid most efficient and economic. Like deregulation regime in Micro Grid market, multi agent generator providers may be considered to make the Micro Grid market competitive. The reason for competitive electricity market is to serve the consumers at a reduced price. The main purpose of this paper is to analyze and propose the pricing mechanism for Micro Grid energy in the competitive electricity market. Central controller of the Micro Grid (μcc) is the main brain behind all energy management system (EMS) activities, which includes participation in the bidding to settle market- clearing price (MCP). Two important market settlement techniques – Day-ahead and Real-time – have been discussed briefly in this paper. Uniform and Pay-as-bid pricing rules have been discussed separately for electricity pricing fixation in the context of Micro Grid. In this paper marketing strategies of some of the renewable DERs – mainly Photovoltaic (PV) and wind generator – have been considered. Wind power is now a potential candidate in non-conventional power generation family. Power available from wind and PV system cost high and is of intermittent in nature. Participation of these two renewable DERs along with Micro turbine, Diesel generator, fuel cells etc. in the bidding for market clearing price (MCP) make the market complex. This paper gives a brief guideline for marketing of PV and wind power. Consumers in the Micro Grid system are categorized as shed-able and non-shed-able according to their priority. How these loads affect demand curve have also been discussed. This paper presents a case study on price determination based on demand and supply side bidding strategies. The impacts of congestion management, market power, carbon taxation, price volatility, etc. on pricing have also been discussed in the context of Micro Grid. Keywords: Energy Management, Market, Microgrid, Distributed Energy Resources (DERs), Market Clearing Price 1 INTRODUCTION Electric power system – all the three sections – Generation, Transmission, and Distribution – is ushering a progressive transition from a centralized control to distributed control regime. Micro-Grid is a concept where local energy potentials, both in renewable (such as small wind, PV, etc.) and non-conventional (micro-turbine, Fuel cells, Diesel generator) resources, are tapped and interconnected among themselves as well as with LV Macro-Grid. These small DERs have different owners. They take decisions – scheduling of generation as per load forecast (i.e., unit commitment) and Economic dispatch of loads – locally with the help of local controllers (μ c ) connected with each DER and Micro- Grid Central Controller (μ cc ). In the islanding operation of Micro-Grid, each source caters only those loads, which are stipulated for the source. ( 3, 9) But when these sources are grid-connected, which is most desirable, then the action of the controllers (both μ c and μ cc ) should have a certain degree of intelligence for participation in the common and competitive market. The purpose of the Energy Management System (EMS) in the Micro-Grid scenario is to make decisions regarding the best use of the generator for producing electric power and heat i.e. combined heat and power (CHP) operation. (3) Such decisions will be based upon the heat requirements of the local establishments, the climate, the price of electric power, the cost of fuel and many other considerations. Micro-Source central controller (μ cc ) acts as a main operator to take decisions regarding the supply of CHP services to be provided as per demand. Like deregulated regime in the Macro- Grid, multi-agent generating providers are considered in the Micro-Grid system. The main idea of this paper is to determine the market clearing price (MCP) due to UPEC 2007 - 854
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1
KEY ENERGY MANAGEMENT ISSUES OF SETTING MARKET CLEARING PRICE
(MCP) IN MICRO-GRID SCENARIO
A.K.Basu
(1) , T.K.Panigrahi
(1) , S.Chowdhury
(2) , S.P.Chowdhury
(1) , N.Chakraborty
(1)
A.Sinha (3)
and Y.H.Song(4)
(1) Jadavpur University, India (2) Women’s Polytechnic, India (3) Tata Consultancy Services Ltd., India
(4) Liverpool University, UK
ABSTRACT
Micro grid is an epitome of a macro grid but works in low voltage comprising of various small-distributed energy
resources (DERs), energy storage devices, and controllable loads being interfaced through fast acting power electronic
devices. Combined heat and power (CHP) produced by DERs are utilized in the local market where Micro Grid
operates either in island mode or in grid-connected mode. The CHP mode of operation makes the Micro Grid most
efficient and economic. Like deregulation regime in Micro Grid market, multi agent generator providers may be
considered to make the Micro Grid market competitive. The reason for competitive electricity market is to serve the
consumers at a reduced price. The main purpose of this paper is to analyze and propose the pricing mechanism for
Micro Grid energy in the competitive electricity market. Central controller of the Micro Grid (µcc) is the main brain
behind all energy management system (EMS) activities, which includes participation in the bidding to settle market-
clearing price (MCP). Two important market settlement techniques – Day-ahead and Real-time – have been discussed
briefly in this paper. Uniform and Pay-as-bid pricing rules have been discussed separately for electricity pricing fixation
in the context of Micro Grid. In this paper marketing strategies of some of the renewable DERs – mainly Photovoltaic
(PV) and wind generator – have been considered. Wind power is now a potential candidate in non-conventional power
generation family. Power available from wind and PV system cost high and is of intermittent in nature. Participation of
these two renewable DERs along with Micro turbine, Diesel generator, fuel cells etc. in the bidding for market clearing
price (MCP) make the market complex. This paper gives a brief guideline for marketing of PV and wind power.
Consumers in the Micro Grid system are categorized as shed-able and non-shed-able according to their priority. How
these loads affect demand curve have also been discussed. This paper presents a case study on price determination
based on demand and supply side bidding strategies. The impacts of congestion management, market power, carbon
taxation, price volatility, etc. on pricing have also been discussed in the context of Micro Grid.
Keywords: Energy Management, Market, Microgrid, Distributed Energy Resources (DERs), Market Clearing Price
1 INTRODUCTION
Electric power system – all the three sections –
Generation, Transmission, and Distribution – is
ushering a progressive transition from a centralized
control to distributed control regime.
Micro-Grid is a concept where local energy
potentials, both in renewable (such as small wind, PV,
etc.) and non-conventional (micro-turbine, Fuel cells,
Diesel generator) resources, are tapped and
interconnected among themselves as well as with LV
Macro-Grid. These small DERs have different owners.
They take decisions – scheduling of generation as per
load forecast (i.e., unit commitment) and Economic
dispatch of loads – locally with the help of local
controllers (µc) connected with each DER and Micro-
Grid Central Controller (µ cc). In the islanding operation
of Micro-Grid, each source caters only those loads,
which are stipulated for the source. (3, 9)
But when these
sources are grid-connected, which is most desirable,
then the action of the controllers (both µ c and µ cc)
should have a certain degree of intelligence for
participation in the common and competitive market.
The purpose of the Energy Management System
(EMS) in the Micro-Grid scenario is to make decisions
regarding the best use of the generator for producing
electric power and heat i.e. combined heat and power
(CHP) operation. (3)
Such decisions will be based upon
the heat requirements of the local establishments, the
climate, the price of electric power, the cost of fuel and
many other considerations. Micro-Source central
controller (µ cc) acts as a main operator to take decisions
regarding the supply of CHP services to be provided as
per demand. Like deregulated regime in the Macro-
Grid, multi-agent generating providers are considered in
the Micro-Grid system. The main idea of this paper is to
determine the market clearing price (MCP) due to
UPEC 2007 - 854
2
dispatch of an aggregated group of different kinds of
DERs and an aggregated group of different kinds of
consumers. These consumers are categorized as
controllable loads i.e., which can be shed and
uninterruptible loads.
An electricity market is a system for effecting the
purchase and sale of electricity using supply and
demand to set the price.(1)
Reducing the price paid by
consumers for electricity is invariably the first reason
given for introducing competitive electricity markets.
Micro-Grid operates in a local market and usually cater
to the customers of medium sizes (such as, commercial
complex, small industries etc.) and residential. These
customers do not have the financial incentives and the
expertise required to contribute effectively in the price
matter to such a complex local market. Possibly as a
consequence of this lack of representation, most
electricity markets do not treat consumers as a genuine
demand side capable of making rational decisions, but
simply as a load that needs to be served under all
conditions.(2)
Active participation in these markets by
demand side remains minimal. This paper has
considered an active participation of both supply and
demand side and thus shown a power-trading model as
in fig. 1.Two important market settlement techniques
are generally adopted in the electricity market –Day-
ahead and Real-time. The day-ahead energy market is
designed for market participants with the day-ahead
prices. After the day-ahead market bidding period
closes, the system operator calculates day-ahead market
clearing prices (MCP) based on bids, offers, and
schedules submitted based on least cost, security
constrained, unit commitment and makes the day-ahead
scheduling for each hour of the next operating day. The
real time market is designed to provide opportunities for
generators that are available but not selected in the day-
ahead scheduling, might alter their bids for use in the
real-time market, otherwise their original day-ahead
market bids remain in effect for the real-time energy
market.(1)
Figure 1 Proposed Micro-Grid market model commercial
structure
With the rising environmental concerns, the wind
and solar energies are better choice at present. The
benefits of grid-connected PV schemes may be seen as
expressing concern for the environment, energy credit
associated with reduction in fuel consumption and an
opportunity to participate and contribute into a new
technology[4]. PV and wind were viewed primarily as a
power source for remote applications far from a Macro-
Grid. With the development of inverters for grid-
connected applications, interest in grid-connected PV
and wind grew[6][7]. Today, due to these changes and
burgeoning Government incentive programs, grid-
connected solar and wind are the fastest growing market
for generation technology. For power systems with a
substantial natural gas component, wind and solar
actually provides a hedge against fluctuations and
spikes in gas costs. This paper also analyses and
proposes the pricing mechanism for wind and solar
integrated into the electricity market.
A good trading mechanism is a basic need for the
market, but due to oligopolistic nature of the electricity
market there are fair chances of having the market
power and market abuse, which reduce the market
efficiency.[5] This paper discusses a few aspects, such
as congestion management, carbon taxation, market
power, price volatility, etc. which affect the price.
2 BIDDING PROCEDURE
In oligopolistic market, several producers compete
to win a share of the market and bid against each other
to supply electricity to the consumers. In current
electricity markets, either a single side bidding (the
generator side) or a double side biding (both generator
side and consumer side) is adopted. No matter whether
it is single side bidding or double, the generator
providers do not know the current level of demand and
consumers do not know the available capacity of
generators. This causes the more complications and
uncertainties in bidding for both sellers and buyers in
the electricity market. Furthermore, electricity auction
markets may have more than one commodity being bid
for simultaneously, for example, real-time energy,
operating reserve, and other ancillary service products.