The purpose of scheduling is to produce efficient (or economic) generation and consumption schedules for the minutes to days ahead based on expected power system conditions. In a similar manner to Chow et al. (2005), I divide the scheduling problem into three phases: dispatch, unit commitment and longer-term scheduling.
Dispatch involves assigning generation or consumption targets to already-committed power system resources in real-time (i.e. several minutes ahead of delivery). Dispatch is carried out by the monopoly utility in vertically-integrated electricity industries, the SO in central dispatch markets and is self-managed by market participants in self-dispatch markets. In the first two cases, the SO dispatches power system resources by running a process known as security-constrained economic dispatch. Security-constrained economic dispatch seeks to find a minimum cost operating configuration for committed generation and loads such that a short-term forecast of non-scheduled demand can be met subject to network constraints and stability and reliability requirements4 (Grainger, 1994). Some SOs solve this problem for a single interval (e.g. in the Australian NEM), whereas others, including the California and Midcontinent ISOs, solve a multi-period dispatch to procure and, to some extent, price capabilities to address expected non-scheduled demand ramps (Ela and O’Malley, 2016; Schiro, 2017). The dispatch solution for each dispatch interval (typically 5–15 minutes long (IRENA, 2019)) consists of generation and consumption setpoints, enablement quantities for resources providing frequency control services and, in central dispatch markets that integrate power system and market operation, real-time market locational marginal prices for energy and ancillary services (Cramton, 2017). If piecewise linear functions are used by vertically-integrated utilities to model resource cost curves, or are required by the real-time market bid format for a market participant’s energy offer curve5, the security-constrained economic dispatch problem can be efficiently solved using linear programming techniques (Wood et al., 2014).
+Dispatch involves assigning generation or consumption targets to already-committed power system resources in real-time (i.e. several minutes ahead of delivery). Dispatch is carried out by the monopoly utility in vertically-integrated electricity industries, the SO in central dispatch markets and is self-managed by market participants in self-dispatch markets. In the first two cases, the SO dispatches power system resources by running a process known as security-constrained economic dispatch. Security-constrained economic dispatch seeks to find a minimum cost operating configuration for committed generation and loads such that a short-term forecast of non-scheduled demand can be met subject to network constraints and stability and reliability requirements4 (Grainger, 1994). Some SOs solve this problem for a single interval (e.g. in the Australian NEM), whereas others, including the California and Midcontinent ISOs, solve a multi-period dispatch to procure and, to some extent, price capabilities to address expected non-scheduled demand ramps (Ela and O’Malley, 2016; Schiro, 2017). The dispatch solution for each dispatch interval (typically 5–15 minutes long) consists of generation and consumption setpoints, enablement quantities for resources providing frequency control services and, in central dispatch markets that integrate power system and market operation, real-time market locational marginal prices for energy and ancillary services (Cramton, 2017). If piecewise linear functions are used by vertically-integrated utilities to model resource cost curves, or are required by the real-time market bid format for a market participant’s energy offer curve5, the security-constrained economic dispatch problem can be efficiently solved using linear programming techniques (Wood et al., 2014).
Thermal and hydroelectric generation, which historically dominated supply in many power systems, have inflexibility constraints (minimum load, start-up time, ramping limits and minimum up and down times) and costs (those attached to resource start-up, shut-down and operation at minimum load) that require SOs and market participants to make non-trivial unit commitment decisions (i.e. whether a resource should be online or offline). Depending on the resource, these decisions are made several minutes to hours ahead of power delivery (Agora Energiewende, 2017; Denholm et al., 2018). Unit commitment is:
Operational planning actions taken in longer-term scheduling timeframes (i.e. a day to years ahead) include resource maintenance scheduling, the management of energy/fuel reserves and ensuring that any social and environmental obligations placed on resources are met (e.g. regulated discharges from hydroelectric scheme dams). Many of these activities are conducted on the basis of information supplied by longer-term weather/climate, power system and market forecasts (Denholm et al., 2018; Helistö et al., 2019; Suckling, 2018). Energy reserve management is a particularly important aspect of longer-term scheduling for power system resources that face material opportunity-costs due to limited energy/fuel storage capacity, seasonally-variable primary energy source availability and/or degradation from operation (McPherson et al., 2020; Xu, 2022). In restructured electricity industries, longer-term scheduling also requires market participants to consider and potentially modify their position in forward markets in which electricity derivatives and contracts are traded (MacGill and Esplin, 2020).
Energy transition has prompted policy-makers worldwide to revisit and redesign existing balancing practices in their jurisdictions. There is a degree of international consensus surrounding desirable high-level design outcomes (Section 2.5.1) and a suite of changes that could assist with accommodating greater shares of VRE. I describe these changes in Section 4.4.3.1 and Section 5.3, but they most notably include enabling greater demand-side participation, making electricity markets faster and more flexible, and acquiring more balancing flexibility by modifying existing reserve products and introducing new ones (Holttinen et al., 2021; Papaefthymiou and Dragoon, 2016; Riesz and Milligan, 2015).
+Energy transition has prompted policy-makers worldwide to revisit and redesign existing balancing practices in their jurisdictions. There is some degree of international consensus surrounding desirable high-level design outcomes (Section 2.5.1) and a suite of changes that could assist with accommodating greater shares of VRE. I describe these changes in Section 4.4.3.1 and Section 5.3, but they most notably include enabling greater demand-side participation, making electricity markets faster and more flexible, and acquiring more balancing flexibility by modifying existing reserve products and introducing new ones (Holttinen et al., 2021; Papaefthymiou and Dragoon, 2016; Riesz and Milligan, 2015).
However, various barriers and complexities pose challenges to the design and implementation of such mechanisms and contribute to the contested nature of the design process (MacGill and Esplin, 2020; Papaefthymiou et al., 2018; Schittekatte and Meeus, 2020; Silva-Rodriguez et al., 2022). I discuss the most pertinent of these in Section 2.5.2.
Below, I present three desirable outcomes of the design process that I use to assess changes to balancing practices throughout this thesis. All three have been previously discussed in the literature and in a co-authored submission to an Australian NEM reform process (MacGill et al., 2020b). As I discuss further in Section 4.4.3 and Section 5.3, in practice there are trade-offs that mean that an improvement in one outcome may come at the expense of another.
@@ -568,10 +568,10 @@Many jurisdictions are presently experiencing or are soon expected to experience high instantaneous penetrations of VRE resources and IBRs (Australian Energy Market Operator, 2019b; Ela et al., 2021; Matevosyan et al., 2021). VRE resources pose challenges to power system balancing as they introduce additional variability and uncertainty, and because IBRs do not provide an inherent or controlled response to frequency deviations unless they are explicitly configured to do so. I elaborate on these challenges in Section 4.3, Section 4.4.3.1 and Section 5.3. These challenges are of greater concern to islanded power systems and weakly-interconnected control areas that have limited to no assistance from a wider synchronous area for balancing assistance (Hodge et al., 2020).
+Many jurisdictions are presently experiencing or are soon expected to experience high instantaneous penetrations of VRE resources and IBRs (Australian Energy Market Operator, 2019b; Ela et al., 2021; Matevosyan et al., 2021). VRE resources pose challenges to power system balancing as they introduce additional variability and uncertainty, and because IBRs do not provide an inherent or controlled response to frequency deviations unless they are explicitly configured to do so. I elaborate on these challenges in Section 4.3, Section 4.4.3.1 and Section 5.3. These challenges are of greater concern to islanded power systems and weakly-interconnected control areas that have limited to no access to a wider synchronous area for balancing assistance (Hodge et al., 2020).
The tension between effectiveness, the primary objective of engineering standards and practices, and efficiency, an outcome championed by economists and often pursued through markets, significantly contributes to the complexity and contested nature of the design process in restructured electricity industries. One perspective of this tension which I present in Section 4.3, Section 5.3 and is extensively discussed by Chao et al. (2005)) is that the efficiency gains obtained through market-based mechanisms for procuring balancing flexibility may come at the expense of the redundancy, certainty and control that a SO might require to guarantee effective balancing. An alternative perspective of this tension is that restructuring enables market participants to scrutinise and lobby for changes to operational practices that adhere to engineering best-practice regardless of the costs of doing so. In other words, market participants can help achieve efficient operation through advocacy “because choices of operating standards can severely impact their profits”, especially in the case of practices associated with “costs that the [SO] passes to participants via grid management charges” (Chao et al., 2005, p. 1984).
-The tension between effectiveness and efficiency can be reframed as the problem of specifying the degree to which balancing flexibility procurement arrangements are centralised (i.e. managed by the SO). The SO is best placed to manage the procurement of specialised and system-critical frequency control services, whereas the provision of some forms of balancing flexibility in scheduling timeframes is largely left to market participants to self-manage. I use this problem framing when outlining the research objectives of this thesis in Chapter 3.
+The tension between effectiveness and efficiency can be reframed as the problem of specifying the degree to which balancing flexibility procurement arrangements are centralised (i.e. managed by the SO). The SO is best placed to manage the procurement of specialised and system-critical frequency control services, whereas the provision of some forms of balancing flexibility in scheduling timeframes can largely be left to market participants to self-manage. I use this problem framing when outlining the research objectives of this thesis in Chapter 3.
Perspectives from both engineering and economics have been invoked in the electricity market design literature when referring to the “second-best” design challenge. MacGill and Esplin (2020) approach the market design problem with a systems engineering perspective guided by the principle of sub-optimisation, which holds that:
@@ -589,7 +589,7 @@
This excerpt alludes to the “quality constraint” imposed by the construct of (spot) markets. As I discuss in Section 4.4.3.2 and Section 5.3, spot markets work best with well-defined, fungible and discrete products. However, such products ignore interdependencies and the wide technical capability “spectrum” of power system resources (Gimon, 2020). The question here is whether the potential benefits of spot market competition and transparency outweigh those of SO coordination and a more nuanced or layered approach to the procurement of different services. Coordination is particularly desirable for balancing flexibility services that are “lumpy” and/or inseparable from other services. For example, mechanical inertia provision requires the commitment of synchronous generation, which in turn augments rotor angle stability and system strength (Billimoria et al., 2020). A practical (or “second-best”) solution to procuring these types of balancing flexibility is for the SO to use long-term bilateral contracts. Contracting can be a preferable procurement mechanism in the presence of uncertainty or market power, or where there is a requirement for a tailored service or a multi-faceted product (Pollitt and Anaya, 2019). If there are benefits to be gained from competitive pressure, contracts can be awarded to market participants through tender processes designed to assess a single criterion (e.g. price) or multiple criteria (e.g. price, community benefit and delivery risk) (Y. Rebours et al., 2007).
4.5.2.4 The design problem is underdetermined
-The design problem for balancing practices is underdetermined. In other words, there are many possible design solution configurations. As I argue in Section 5.3, this is because some processes, services and markets have overlapping roles and functions. The primary challenges of a wide solution space are that policy-makers must determine the trade-offs between different design objectives for each solution configuration (e.g. between complexity, reducing constraints on the system and the level of nuance or layering in the suite of power system services), and that they must also assess which trade-offs are most acceptable across all practical solution configurations (van der Veen and Hakvoort, 2016).
+The design problem for balancing practices is underdetermined. In other words, there are many possible design solution configurations. As I argue in Section 5.3, this is because some processes, services and markets have overlapping roles and functions. The primary challenges of a wide solution space are that policy-makers must determine the trade-offs between different design objectives for each solution configuration (e.g. between complexity, reducing constraints on the system and the level of nuance or layering in the suite of power system services), and must also assess which trade-offs are most acceptable across all practical solution configurations (van der Veen and Hakvoort, 2016).
4.5.2.5 Grid architectures
Power systems are becoming increasingly distributed as they integrate large numbers of consumer-owned energy resources. This shift has prompted policy-makers to propose new grid architectures that re-envisage the roles of and relationships between actors and resources in their jurisdictions (Conejo and Sioshansi, 2018). Examples include architectures that build power system resilience through interconnected microgrids (Hanna and Marqusee, 2022), or those that enable consumer-owned energy resources to actively participate in transmission or distribution-level real-time markets (Kristov et al., 2016; Schittekatte and Pototschnig, 2022). Transitioning to any one grid architecture requires forward-looking balancing practice design; however, given that long-term planning involves deep uncertainties (Lambert et al., 2003), policy-makers must maximise design flexibility (or alternatively, reduce the number of design and system constraints imposed by operational practices) to retain option value (Fisher, 2000).
4.5.2.6 Diversity of initial conditions and outcomes
@@ -633,7 +633,7 @@5.1.4 Case studies of the Australian National Electricity Market
Whilst this thesis aims to achieve these research objectives and thus produce insights for policy-makers worldwide, I draw on experiences from the Australian NEM and use its resource configurations and market arrangements in the case studies contained within this thesis. Research from the NEM should be of interest to electricity market designers elsewhere for several reasons:
@@ -2437,9 +2437,6 @@References
International Renewable Energy Agency, 2017. Adapting Market Design To High Shares of Variable Renewable Energy.--IRENA, 2019. Increasing time granularity in electricity markets. -Isemonger, A.G., 2009. The evolving design of RTO ancillary service markets. Energy Policy 37, 150–157. https://doi.org/10.1016/j.enpol.2008.06.033diff --git a/output/thesis.docx b/output/thesis.docx index f7591c2..521ce8c 100644 Binary files a/output/thesis.docx and b/output/thesis.docx differ diff --git a/output/thesis.pdf b/output/thesis.pdf index 040c729..4e52a14 100644 Binary files a/output/thesis.pdf and b/output/thesis.pdf differ diff --git a/output/thesis.tex b/output/thesis.tex index 2b5fb83..c689e4a 100644 --- a/output/thesis.tex +++ b/output/thesis.tex @@ -327,7 +327,7 @@ \normalsize UNSW Sydney, Australia\\ - March 25, 2024 + March 27, 2024 % Except where otherwise noted, content in this thesis is licensed under a Creative Commons Attribution 4.0 License (http://creativecommons.org/licenses/by/4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. Copyright 2015,Tom Pollard. @@ -919,9 +919,9 @@ \section{Structure of the thesis}\label{structure-of-the-thesis}} market participation to date. Then, in a case study of the NEM, I examine errors in the NEM's centralised price forecasts, propose a hypothesis to explain increasing divergence and the occurrence of price -swings in these forecasts, and then use the same centralised price -forecasts to schedule a variety of battery energy storage systems for -wholesale energy market arbitrage to assess the impact of imperfect +swings in these forecasts, and subsequently use the same centralised +price forecasts to schedule a variety of battery energy storage systems +for wholesale energy market arbitrage to assess the impact of imperfect foresight on arbitrage revenues. I conclude by discussing changes to market participant scheduling and market design that could maximise the balancing value of resources such as battery energy storage systems. @@ -1863,11 +1863,9 @@ \subsubsection{Dispatch}\label{dispatch}} O'Malley, 2016}; \protect\hyperlink{ref-schiroProcurementPricingRamping2017}{Schiro, 2017}). The dispatch solution for each dispatch interval (typically -5--15 minutes long -(\protect\hyperlink{ref-irenaIncreasingTimeGranularity2019}{IRENA, -2019})) consists of generation and consumption setpoints, enablement -quantities for resources providing frequency control services and, in -central dispatch markets that integrate power system and market +5--15 minutes long) consists of generation and consumption setpoints, +enablement quantities for resources providing frequency control services +and, in central dispatch markets that integrate power system and market operation, real-time market locational marginal prices for energy and ancillary services (\protect\hyperlink{ref-cramtonElectricityMarketDesign2017}{Cramton, @@ -1978,8 +1976,8 @@ \section{Designing balancing practices in operational timeframes}\label{sec:lit_review-design}} Energy transition has prompted policy-makers worldwide to revisit and -redesign existing balancing practices in their jurisdictions. There is a -degree of international consensus surrounding desirable high-level +redesign existing balancing practices in their jurisdictions. There is +some degree of international consensus surrounding desirable high-level design outcomes (Section~\ref{sec:lit_review-design_outcomes}) and a suite of changes that could assist with accommodating greater shares of VRE. I describe these changes in Section~\ref{sec:fcs-ibr-challenges} @@ -2076,8 +2074,8 @@ \subsubsection{Variable renewable energy and inverter-based Section~\ref{sec:fcs-ibr-challenges} and Section~\ref{sec:reserves-intro}. These challenges are of greater concern to islanded power systems and weakly-interconnected control -areas that have limited to no assistance from a wider synchronous area -for balancing assistance +areas that have limited to no access to a wider synchronous area for +balancing assistance (\protect\hyperlink{ref-hodgeAddressingTechnicalChallenges2020}{Hodge et al., 2020}). @@ -2113,9 +2111,9 @@ \subsubsection{The tension between effectiveness and procurement arrangements are \emph{centralised} (i.e.~managed by the SO). The SO is best placed to manage the procurement of specialised and system-critical frequency control services, whereas the provision of -some forms of balancing flexibility in scheduling timeframes is largely -left to market participants to self-manage. I use this problem framing -when outlining the research objectives of this thesis in Chapter +some forms of balancing flexibility in scheduling timeframes can largely +be left to market participants to self-manage. I use this problem +framing when outlining the research objectives of this thesis in Chapter \ref{sec:research_framework}. \hypertarget{sec:lit_review-design-challenges-secondbest}{% @@ -2294,9 +2292,8 @@ \subsubsection{The design problem is must determine the trade-offs between different design objectives for each solution configuration (e.g.~between complexity, reducing constraints on the system and the level of nuance or layering in the -suite of power system services), and that they must also assess which -trade-offs are most acceptable across all practical solution -configurations +suite of power system services), and must also assess which trade-offs +are most acceptable across all practical solution configurations (\protect\hyperlink{ref-vanderveenElectricityBalancingMarket2016}{van der Veen and Hakvoort, 2016}). @@ -2561,21 +2558,22 @@ \subsection{Research Objective 3}\label{research-objective-3}} Understanding the quantity of balancing flexibility available in a power system is inadequate if market participants are unable or unwilling to -offer it into the wholesale spot market. Market participation decisions -and thus resource schedules are informed by knowledge processes, which -provide current and forecasted power system and market information. As -such, these knowledge processes and, more broadly, market participation -rules must be purpose-fit to enable resource scheduling that leads to -effective and efficient system balancing. To the best of my knowledge, -there are only a few studies that discuss the significance of market -information and market participation rules in scheduling power system -resources in electricity markets. However, none of these studies use -empirical evidence to support scheduling or policy recommendations. -Furthermore, whilst previous studies have examined the impact of -imperfect foresight on energy storage resources with different storage -durations, they do not simulate storage operation in fast markets -(i.e.~dispatch decisions every 5 minutes) with high real-time prices and -significant penetrations of VRE. +offer resource flexibility into wholesale electricity markets. Market +participation decisions and thus resource schedules are informed by +knowledge processes, which provide current and forecasted power system +and market information. As such, these knowledge processes and, more +broadly, market participation rules must be purpose-fit to enable +resource scheduling that leads to effective and efficient system +balancing. To the best of my knowledge, there are only a few studies +that discuss the significance of market information and market +participation rules in scheduling power system resources in electricity +markets. However, none of these studies use empirical evidence to +support scheduling or policy recommendations. Furthermore, whilst +previous studies have examined the impact of imperfect foresight on +energy storage resources with different storage durations, they do not +simulate storage operation in fast markets (i.e.~dispatch decisions +every 5 minutes) with high real-time prices and significant penetrations +of VRE. Chapter \ref{sec:info} explores how market information and market participant operational strategies impact the deployability of balancing @@ -10502,10 +10500,6 @@ \chapter*{References}\label{references}} \href{http://www.irena.org/publications/2017/May/Adapting-Market-Design-to-High-Shares-of-Variable-Renewable-Energy}{Adapting {Market Design To High Shares} of {Variable Renewable Energy}}. -\leavevmode\vadjust pre{\hypertarget{ref-irenaIncreasingTimeGranularity2019}{}}% -IRENA, 2019. \href{https://www.irena.org}{Increasing time granularity in -electricity markets}. - \leavevmode\vadjust pre{\hypertarget{ref-isemongerEvolvingDesignRTO2009}{}}% Isemonger, A.G., 2009. The evolving design of {RTO} ancillary service markets. Energy Policy 37, 150--157. diff --git a/source/09_intro.md b/source/09_intro.md index 9622d55..8499b61 100644 --- a/source/09_intro.md +++ b/source/09_intro.md @@ -72,7 +72,7 @@ This thesis consists of 7 chapters and 4 appendices. **[Chapter @sec:reserves]** focuses on understanding balancing flexibility *capabilities* available in scheduling timeframes as VRE and storage become a larger part of system resource mixes. In this chapter, I first provide an overview of how balancing flexibility is enabled and procured in the NEM before describing a methodology to quantify available reserves and footroom across deployment horizons for various resource types. I then quantify the available reserves and footroom in two regions of the NEM for existing resource mixes in 2020 and potential resources mixes in 2025, with two scenarios for the latter. From the findings of this case study, I explore the role of reserve products in securing balancing flexibility. **[Appendix @sec:appendix-reserves_assumptions]** outlines the sources for key input data and assumptions, and provides further details regarding how these data were used in the analysis. -**[Chapter @sec:info]** explores how future pricing information and market participant operational strategies affect the *deployability* of balancing flexibility from energy storage resources. In this chapter, I first summarise market information, participation and clearing processes in the NEM in addition to providing context on grid-scale energy storage resource deployment, operation and market participation to date. Then, in a case study of the NEM, I examine errors in the NEM's centralised price forecasts, propose a hypothesis to explain increasing divergence and the occurrence of price swings in these forecasts, and then use the same centralised price forecasts to schedule a variety of battery energy storage systems for wholesale energy market arbitrage to assess the impact of imperfect foresight on arbitrage revenues. I conclude by discussing changes to market participant scheduling and market design that could maximise the balancing value of resources such as battery energy storage systems. **[Appendix @sec:appendix-milps]** presents the mixed-integer linear program formulations used in the storage modelling in [Chapter @sec:info], and **[Appendix @sec:appendix-discounting]** describes the methodology used to model a storage scheduler discounting price forecasts (one of the formulations used in the storage modelling in [Chapter @sec:info] and described in [Appendix @sec:appendix-milps]). +**[Chapter @sec:info]** explores how future pricing information and market participant operational strategies affect the *deployability* of balancing flexibility from energy storage resources. In this chapter, I first summarise market information, participation and clearing processes in the NEM in addition to providing context on grid-scale energy storage resource deployment, operation and market participation to date. Then, in a case study of the NEM, I examine errors in the NEM's centralised price forecasts, propose a hypothesis to explain increasing divergence and the occurrence of price swings in these forecasts, and subsequently use the same centralised price forecasts to schedule a variety of battery energy storage systems for wholesale energy market arbitrage to assess the impact of imperfect foresight on arbitrage revenues. I conclude by discussing changes to market participant scheduling and market design that could maximise the balancing value of resources such as battery energy storage systems. **[Appendix @sec:appendix-milps]** presents the mixed-integer linear program formulations used in the storage modelling in [Chapter @sec:info], and **[Appendix @sec:appendix-discounting]** describes the methodology used to model a storage scheduler discounting price forecasts (one of the formulations used in the storage modelling in [Chapter @sec:info] and described in [Appendix @sec:appendix-milps]). **[Chapter @sec:conclusion]** concludes the thesis. In this chapter, I summarise the contributions of this thesis and highlight avenues for further work. diff --git a/source/10_lit_review.md b/source/10_lit_review.md index 77941b4..8ef85b7 100644 --- a/source/10_lit_review.md +++ b/source/10_lit_review.md @@ -180,7 +180,7 @@ The purpose of **scheduling** is to produce efficient (or economic) generation a #### Dispatch -Dispatch involves assigning generation or consumption targets to already-committed power system resources in real-time (i.e. several minutes ahead of delivery). Dispatch is carried out by the monopoly utility in vertically-integrated electricity industries, the SO in central dispatch markets and is self-managed by market participants in self-dispatch markets. In the first two cases, the SO dispatches power system resources by running a process known as **security-constrained economic dispatch**. Security-constrained economic dispatch seeks to find a minimum cost operating configuration for committed generation and loads such that a short-term forecast of non-scheduled demand can be met subject to network constraints and stability and reliability requirements[^4] [@graingerPowerSystemAnalysis1994]. Some SOs solve this problem for a single interval (e.g. in the Australian NEM), whereas others, including the California and Midcontinent ISOs, solve a multi-period dispatch to procure and, to some extent, price capabilities to address expected non-scheduled demand ramps [@schiroProcurementPricingRamping2017; @elaSchedulingPricingExpected2016]. The dispatch solution for each dispatch interval (typically 5–15 minutes long [@irenaIncreasingTimeGranularity2019]) consists of generation and consumption setpoints, enablement quantities for resources providing frequency control services and, in central dispatch markets that integrate power system and market operation, real-time market locational marginal prices for energy and ancillary services [@cramtonElectricityMarketDesign2017]. If piecewise linear functions are used by vertically-integrated utilities to model resource cost curves, or are required by the real-time market bid format for a market participant's energy offer curve[^5], the security-constrained economic dispatch problem can be efficiently solved using linear programming techniques [@woodPowerGenerationOperation2014]. +Dispatch involves assigning generation or consumption targets to already-committed power system resources in real-time (i.e. several minutes ahead of delivery). Dispatch is carried out by the monopoly utility in vertically-integrated electricity industries, the SO in central dispatch markets and is self-managed by market participants in self-dispatch markets. In the first two cases, the SO dispatches power system resources by running a process known as **security-constrained economic dispatch**. Security-constrained economic dispatch seeks to find a minimum cost operating configuration for committed generation and loads such that a short-term forecast of non-scheduled demand can be met subject to network constraints and stability and reliability requirements[^4] [@graingerPowerSystemAnalysis1994]. Some SOs solve this problem for a single interval (e.g. in the Australian NEM), whereas others, including the California and Midcontinent ISOs, solve a multi-period dispatch to procure and, to some extent, price capabilities to address expected non-scheduled demand ramps [@schiroProcurementPricingRamping2017; @elaSchedulingPricingExpected2016]. The dispatch solution for each dispatch interval (typically 5–15 minutes long) consists of generation and consumption setpoints, enablement quantities for resources providing frequency control services and, in central dispatch markets that integrate power system and market operation, real-time market locational marginal prices for energy and ancillary services [@cramtonElectricityMarketDesign2017]. If piecewise linear functions are used by vertically-integrated utilities to model resource cost curves, or are required by the real-time market bid format for a market participant's energy offer curve[^5], the security-constrained economic dispatch problem can be efficiently solved using linear programming techniques [@woodPowerGenerationOperation2014]. [^4]: This is a common variant of the generic problem description described in [@sec:lit_review-operations]. @@ -204,7 +204,7 @@ Operational planning actions taken in longer-term scheduling timeframes (i.e. a ## Designing balancing practices in operational timeframes {#sec:lit_review-design} -Energy transition has prompted policy-makers worldwide to revisit and redesign existing balancing practices in their jurisdictions. There is a degree of international consensus surrounding desirable high-level design outcomes ([@sec:lit_review-design_outcomes]) and a suite of changes that could assist with accommodating greater shares of VRE. I describe these changes in [@sec:fcs-ibr-challenges] and [@sec:reserves-intro], but they most notably include enabling greater demand-side participation, making electricity markets faster and more flexible, and acquiring more balancing flexibility by modifying existing reserve products and introducing new ones [@papaefthymiou100RenewableEnergy2016; @holttinenDesignOperationEnergy2021; @rieszDesigningElectricityMarkets2015]. +Energy transition has prompted policy-makers worldwide to revisit and redesign existing balancing practices in their jurisdictions. There is some degree of international consensus surrounding desirable high-level design outcomes ([@sec:lit_review-design_outcomes]) and a suite of changes that could assist with accommodating greater shares of VRE. I describe these changes in [@sec:fcs-ibr-challenges] and [@sec:reserves-intro], but they most notably include enabling greater demand-side participation, making electricity markets faster and more flexible, and acquiring more balancing flexibility by modifying existing reserve products and introducing new ones [@papaefthymiou100RenewableEnergy2016; @holttinenDesignOperationEnergy2021; @rieszDesigningElectricityMarkets2015]. However, various barriers and complexities pose challenges to the design and implementation of such mechanisms and contribute to the contested nature of the design process [@papaefthymiouPowerSystemFlexibility2018; @silva-rodriguezShortTermWholesale2022; @schittekatteFlexibilityMarketsProject2020; @macgillEndtoendElectricityMarket2020]. I discuss the most pertinent of these in [@sec:lit_review-design_challenges]. @@ -222,13 +222,13 @@ Below, I present three desirable outcomes of the design process that I use to as #### Variable renewable energy and inverter-based resources -Many jurisdictions are presently experiencing or are soon expected to experience high instantaneous penetrations of VRE resources and IBRs [@australianenergymarketoperatorMaintainingPowerSystem2019; @matevosyanFutureInverterBasedResources2021; @elaElectricityMarketFuture2021]. VRE resources pose challenges to power system balancing as they introduce additional variability and uncertainty, and because IBRs do not provide an inherent or controlled response to frequency deviations unless they are explicitly configured to do so. I elaborate on these challenges in [@sec:fcs-intro], [@sec:fcs-ibr-challenges] and [@sec:reserves-intro]. These challenges are of greater concern to islanded power systems and weakly-interconnected control areas that have limited to no assistance from a wider synchronous area for balancing assistance [@hodgeAddressingTechnicalChallenges2020]. +Many jurisdictions are presently experiencing or are soon expected to experience high instantaneous penetrations of VRE resources and IBRs [@australianenergymarketoperatorMaintainingPowerSystem2019; @matevosyanFutureInverterBasedResources2021; @elaElectricityMarketFuture2021]. VRE resources pose challenges to power system balancing as they introduce additional variability and uncertainty, and because IBRs do not provide an inherent or controlled response to frequency deviations unless they are explicitly configured to do so. I elaborate on these challenges in [@sec:fcs-intro], [@sec:fcs-ibr-challenges] and [@sec:reserves-intro]. These challenges are of greater concern to islanded power systems and weakly-interconnected control areas that have limited to no access to a wider synchronous area for balancing assistance [@hodgeAddressingTechnicalChallenges2020]. #### The tension between effectiveness and efficiency The tension between effectiveness, the primary objective of engineering standards and practices, and efficiency, an outcome championed by economists and often pursued through markets, significantly contributes to the complexity and contested nature of the design process in restructured electricity industries. One perspective of this tension which I present in [@sec:fcs-intro], [@sec:reserves-intro] and is extensively discussed by @chaoInterfaceEngineeringMarket2005) is that the efficiency gains obtained through market-based mechanisms for procuring balancing flexibility may come at the expense of the redundancy, certainty and control that a SO might require to guarantee effective balancing. An alternative perspective of this tension is that restructuring enables market participants to scrutinise and lobby for changes to operational practices that adhere to engineering best-practice regardless of the costs of doing so. In other words, market participants can help achieve efficient operation through advocacy "because choices of operating standards can severely impact their profits", especially in the case of practices associated with "costs that the [SO] passes to participants via grid management charges" [@chaoInterfaceEngineeringMarket2005, p.1984]. -The tension between effectiveness and efficiency can be reframed as the problem of specifying the degree to which balancing flexibility procurement arrangements are *centralised* (i.e. managed by the SO). The SO is best placed to manage the procurement of specialised and system-critical frequency control services, whereas the provision of some forms of balancing flexibility in scheduling timeframes is largely left to market participants to self-manage. I use this problem framing when outlining the research objectives of this thesis in [Chapter @sec:research_framework]. +The tension between effectiveness and efficiency can be reframed as the problem of specifying the degree to which balancing flexibility procurement arrangements are *centralised* (i.e. managed by the SO). The SO is best placed to manage the procurement of specialised and system-critical frequency control services, whereas the provision of some forms of balancing flexibility in scheduling timeframes can largely be left to market participants to self-manage. I use this problem framing when outlining the research objectives of this thesis in [Chapter @sec:research_framework]. #### The requirement for "second-best" design {#sec:lit_review-design-challenges-secondbest} @@ -256,7 +256,7 @@ This excerpt alludes to the "quality constraint" imposed by the construct of (sp #### The design problem is underdetermined -The design problem for balancing practices is **underdetermined**. In other words, there are many possible design solution configurations. As I argue in [@sec:reserves-intro], this is because some processes, services and markets have overlapping roles and functions. The primary challenges of a wide solution space are that policy-makers must determine the trade-offs between different design objectives for each solution configuration (e.g. between complexity, reducing constraints on the system and the level of nuance or layering in the suite of power system services), and that they must also assess which trade-offs are most acceptable across all practical solution configurations [@vanderveenElectricityBalancingMarket2016]. +The design problem for balancing practices is **underdetermined**. In other words, there are many possible design solution configurations. As I argue in [@sec:reserves-intro], this is because some processes, services and markets have overlapping roles and functions. The primary challenges of a wide solution space are that policy-makers must determine the trade-offs between different design objectives for each solution configuration (e.g. between complexity, reducing constraints on the system and the level of nuance or layering in the suite of power system services), and must also assess which trade-offs are most acceptable across all practical solution configurations [@vanderveenElectricityBalancingMarket2016]. #### Grid architectures diff --git a/source/11_research_framework.md b/source/11_research_framework.md index b6cd867..ab6cfe0 100644 --- a/source/11_research_framework.md +++ b/source/11_research_framework.md @@ -35,7 +35,7 @@ In wholesale electricity markets, market participation decisions determine the t > *To explore how more decentralised operational balancing practices can be configured to maximise the deployability of balancing flexibility in scheduling timeframes.* -Understanding the quantity of balancing flexibility available in a power system is inadequate if market participants are unable or unwilling to offer it into the wholesale spot market. Market participation decisions and thus resource schedules are informed by knowledge processes, which provide current and forecasted power system and market information. As such, these knowledge processes and, more broadly, market participation rules must be purpose-fit to enable resource scheduling that leads to effective and efficient system balancing. To the best of my knowledge, there are only a few studies that discuss the significance of market information and market participation rules in scheduling power system resources in electricity markets. However, none of these studies use empirical evidence to support scheduling or policy recommendations. Furthermore, whilst previous studies have examined the impact of imperfect foresight on energy storage resources with different storage durations, they do not simulate storage operation in fast markets (i.e. dispatch decisions every 5 minutes) with high real-time prices and significant penetrations of VRE. +Understanding the quantity of balancing flexibility available in a power system is inadequate if market participants are unable or unwilling to offer resource flexibility into wholesale electricity markets. Market participation decisions and thus resource schedules are informed by knowledge processes, which provide current and forecasted power system and market information. As such, these knowledge processes and, more broadly, market participation rules must be purpose-fit to enable resource scheduling that leads to effective and efficient system balancing. To the best of my knowledge, there are only a few studies that discuss the significance of market information and market participation rules in scheduling power system resources in electricity markets. However, none of these studies use empirical evidence to support scheduling or policy recommendations. Furthermore, whilst previous studies have examined the impact of imperfect foresight on energy storage resources with different storage durations, they do not simulate storage operation in fast markets (i.e. dispatch decisions every 5 minutes) with high real-time prices and significant penetrations of VRE. [Chapter @sec:info] explores how market information and market participant operational strategies impact the deployability of balancing flexibility from energy-limited storage resources, which are expected to aid in balancing electricity markets with high penetrations of variable renewable energy through energy arbitrage. In this chapter, I focus on the scheduling coordination role of centralised price forecasts generated by the system and market operator in Australian NEM. I highlight the increasing frequency and severity of errors in these price forecasts, and propose a hypothesis that market participant (re)bidding is partially responsible for this phenomenon. I then model the extent to which arbitrage revenues might be reduced (compared to perfect foresight operation) should these forecasts guide battery energy storage scheduling. Based on the findings from these analyses, I discuss potential changes to market participant scheduling strategies and market design that could improve scheduling outcomes. I recommend that Australian policy-makers not only increase the frequency at which centralised knowledge processes are run, but also consider whether stricter market participation restrictions might incentivise participant bidding strategies that are less likely to induce sudden price forecast swings that can hamper effective scheduling.