Recent research published in ‘Frontiers in Energy Research’ highlights a significant challenge in the transition to renewable energy: insufficient flexibility in power systems. The study, led by Xu Wen, focuses on how different mechanisms for allocating costs associated with ancillary services can impact the revenues of market participants, particularly in the context of operating reserves.
The research underscores the importance of a well-designed cost allocation mechanism, which can ensure that flexible resources are adequately compensated for their role in stabilizing the grid. This is particularly crucial as the integration of renewable energy sources, like wind and solar, often leads to fluctuations in power supply. The study aims to validate whether various cost allocation strategies can help alleviate the flexibility issues faced by power systems.
Using a long-term market operation simulation model that incorporates energy-reserve joint clearing, the researchers quantified the revenues of market participants under different reserve cost allocation mechanisms. They also developed a self-dispatch model for energy storage systems (ESS) that are powered by renewables. This model allowed them to analyze how energy storage can enhance the revenues of renewable energy producers, particularly when different cost allocation strategies are applied.
The findings from case studies based on real data from a provincial power grid in China reveal that a well-structured reserve cost allocation mechanism can significantly improve the financial outlook for flexible resources. “With the well-designed reserve cost allocation mechanism, the revenues of flexible resources can be ensured,” states Xu Wen. This suggests that companies operating in the energy sector, especially those involved in renewable energy and energy storage, may find new commercial opportunities by advocating for or implementing effective cost allocation strategies.
Additionally, the research demonstrates that equipping renewable energy sources with energy storage systems can help mitigate their inherent fluctuations and uncertainties. This dual approach—enhancing the financial viability of flexible resources while promoting the stability of renewable energy supply—could present valuable opportunities for businesses involved in energy technology and infrastructure.
As the energy market continues to evolve, stakeholders in the electricity sector should pay close attention to these findings. The successful implementation of flexible resource compensation mechanisms could not only drive revenue growth for energy producers but also facilitate a more resilient and sustainable energy system.
