Volatility of Power Grids Under Real-Time Pricing

By Mardavij Roozbehani, Munther A. Dahleh, Sanjoy K. Mitter. IEEE Transactions on Power Systems, 2011

376 citations recorded by the source corpus.

The paper proposes a framework for modeling and analysis of the dynamics of supply, demand, and clearing prices in power systems with real-time retail pricing and information asymmetry. Characterized by passing on the real-time wholesale electricity prices to the end consumers, real-time pricing creates a closed-loop feedback system between the physical layer and the market layer of the system. In the absence of a carefully designed control law, such direct feedback can increase sensitivity and lower the system's robustness to uncertainty in demand and generation. It is shown that price volatility can be characterized in terms of the system's maximal relative price elasticity, defined as the maximal ratio of the generalized price-elasticity of consumers to that of the producers. As this ratio increases, the system may become more volatile. Since new demand response technologies increase the price-elasticity of demand, and since increased penetration of distributed generation can also increase the uncertainty in price-based demand response, the theoretical findings suggest that the architecture under examination can potentially lead to increased volatility. This study highlights the need for assessing architecture systematically and in advance, in order to optimally strike the trade-offs between volatility/robustness and performance metrics such as economic efficiency and environmental efficiency.

Subfields: Control and Systems Engineering, Electrical and Electronic Engineering

View Paper: https://www.semanticscholar.org/paper/f360694691abd1b6c8e0f8decc17040235ae8b36

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Citations in the corpus

Aggregate Flexibility of Thermostatically Controlled Loads (2015, background): “Moreover, with large scale deployment of price-based demand response programs, power system stability becomes a serious concern [23].”
Arbitraging Intraday Wholesale Energy Market Prices With Aggregations of Thermostatic Loads (2015, background): “Otherwise, price volatility may decrease, reducing the potential for arbitrage and, consequently, energy 0885-8950 © 2014 IEEE.”
Using peer-to-peer energy-trading platforms to incentivize prosumers to form federated power plants (2018, background): “Also, indirect price-based coordination strategies can increase demand volatility and reduce system stability 49 .”
Coupon Incentive-Based Demand Response: Theory and Case Study (2013, background): “In addition, concerns have been raised that RTP may increase the price volatility [12].”
An overview of Demand Response: Key-elements and international experience (2017, background): “To deal with this issue, appropriate control regulations should be developed in order to de ﬁ ne the interaction between demand and the market in order to reduce the volatility of demand and price; however, this would deteriorate the economic e ﬃ ciency [203].”
Benefits and challenges of electrical demand response: A critical review (2014, background): “[53] note that appropriate control laws could be used to regulate the interaction between demand and the market to reduce demand and price volatility caused by information asymmetry, although this would cause a loss in economic efficiency.”