I am curious if the current electricity pricing mechanisms are suitable for a grid with distributed renewable generation. I am interested in real-time pricing where changes in demand and renewable generation determines the price. Can we use a mechanism e.g. Price = m x Pi + Price_base where Pi is power injection on a bus i.e. difference in generation and load, Price_base is the base price settled in day-ahead market and m is the rate at which the price is increased to achieve demand response.
I am a newbie, have studied number papers but so far none I could find that deals with distributed generation.
Any helpful guidance would be great.
Dear Saifullah Khalid
Please see these attachments sites
Best regards
https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf
https://www.ise.fraunhofer.de/content/dam/ise/en/documents/publications/studies/EN2018_Fraunhofer-ISE_LCOE_Renewable_Energy_Technologies.pdf
https://www.ise.fraunhofer.de/content/dam/ise/en/documents/publications/studies/EN2018_Fraunhofer-ISE_LCOE_Renewable_Energy_Technologies.pdf
https://arxiv.org/pdf/1611.08006
Article Optimal operation of distribution networks with presence of ...
https://aceee.org/files/proceedings/2006/data/papers/SS06_Panel5_Paper09.pdf
What are you trying to achieve here? Let's be clear by what you mean by price. Is it the price on some network, or the price paid by the consumer? Surely not the latter as that is determined solely by how much profit the reseller wants to achieve and has nothing to do with spot pricing. Since the generation cost of the electricity doesn't change from moment to moment, you are surely trying to derive, in this 'price', and economic signal on which some further decisions are based. What sort of signal, what sort of decisions do you anticipate being made? Then you will be able to determine how to generate a suitable economic signal for them. But as you can see, I am VERY sceptical about all this sort of thing; I am disgusted at finding the consumer price of electricity is likely 8 or 10 times its generation cost and has nothing to do with any spot price however derived at some point in the transmission / distribution chain.
Investment in solar and wind farms are generally done by energy supply company, hence in your formula Base price ( interest and depreciation cost) would increased at the cost of Pi, to bus by reduced fueled cost generation , with the increased system efficiency(improved Power factor), hence supply company could make more profit, as Pprice would reduced ......
Dear sir, thank you very much for the insightful answers.
Tony Maine , regarding your queries, I am trying to figure out an expected network price a user may have to pay and the aim is to take DR decision. Also, I assume that market competition controls seller behavior and profit.
A little comments about scheme itself, Pi factor in pricing scheme given in question caters for the demand and supply gap or in other words brings in demand factor into the pricing. So, as the supply falls short the prices are increased, otherwise, the base price is charged.
Still need your guidance about the pricing when we have distributed generation, at what level the prices are settled can we assume that a bus or a node can have different prices in this case.
Saifullah, I don't think it's safe to assume seller behaviour and profit are strongly related to market competition, they are more related to greed and the desire to maximise said profit. I am also skeptical about generating a price signal based on lack of supply - is this supposed to provoke the construction of more supply? How would it do that in a distributed and privately owned generation system? You need to ensure that the generators receive the increased 'prices' by incorporating a robust mechanism for passing on these values to the generator.
I also disagree totally with the current trend to calculate and apply prices on shorter and shorter timescales, much like microtrading on the stock market. These are just financial conjuring to generate money out of nothing while adding no value to anything. A stable system must have a dominant time constant and be fully specified so that all the users know what they are dealing with and can act accordingly. With those constraints, I wish you well in your research! Best wishes.
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