Centralized volatility reduction for electricity markets

Khaled Alshehri, Subhonmesh Bose, Tamer Başar

Research output: Contribution to journalArticlepeer-review

Abstract

Increased penetration of wind energy will make electricity market prices more volatile. As a result, market participants will bear increased financial risks, which impact investment decisions and in turn, makes it harder to achieve sustainable energy goals. As a remedy, in this paper, we propose an insurance market that complements any wholesale market design. Our mechanism can be run by any suitable financial entity such as an independent system operator, with the aim of reducing the financial impacts of volatile prices. We provide theoretical guarantees, analytically characterize the outcomes over a copperplate power system example, and numerically explore the same for a modified IEEE 14-bus test system.

Original languageEnglish (US)
Article number107101
JournalInternational Journal of Electrical Power and Energy Systems
Volume133
DOIs
StatePublished - Dec 2021
Externally publishedYes

Keywords

  • Electricity markets
  • Insurance Contracts
  • Mechanism design
  • Wind energy

ASJC Scopus subject areas

  • Energy Engineering and Power Technology
  • Electrical and Electronic Engineering

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