In a significant stride towards modernizing the U.S. electricity market, researchers have developed a novel model that could reshape how distributed energy resources (DERs) participate in wholesale electricity markets. The study, led by Jesse Holzer of the Pacific Northwest National Laboratory, was recently published in the International Journal of Electrical Power & Energy Systems, which translates to the Journal of Electrical Power and Energy Systems.
The Federal Energy Regulatory Commission’s (FERC) Order 2222 has mandated that all wholesale electricity markets must now allow DERs to participate as aggregated resources. This means that individual resources, such as rooftop solar panels, battery storage systems, and demand response programs, can be grouped together and dispatched as a single entity. Holzer’s research presents a model for a distributed energy resource aggregator (DERA) that can be scheduled by market operators using security constrained unit commitment (SCUC) and security constrained economic dispatch (SCED).
“The key challenge here is to accurately represent the diverse characteristics of DERs in a way that market operators can understand and utilize,” Holzer explained. “Our model addresses this by including constraints for battery energy storage systems, demand response resources, and simple DERs.”
The model offers two methods for DERAs to generate market offer curves: a profit-maximizing optimization to compute cost curves and a direct cost algorithm to determine dispatch costs for each resource and combine them into cost curves. Once scheduled, the model can dispatch individual DERs to maximize profit or minimize schedule deviation.
One of the most compelling findings of the study is the potential for unavoidable schedule deviations due to internal DER constraints and economic incentives to deviate from the SCUC/SCED schedules. This underscores the critical role of DERA offer construction in ensuring market efficiency and system reliability.
“Our approach considers the asymmetry of price incentives impacting DERAs from the wholesale market compared to those impacting consumers from the retail market,” Holzer noted. “This is a crucial aspect that has been often overlooked in previous studies.”
The research also introduces a novel method for modeling aggregate consumer response through statistically parameterizable utility functions, avoiding the impracticality of modeling each individual consumer. Moreover, it demonstrates how DERA operational dispatch models can be used to create offers for the wholesale electricity market and highlights how DERAs may fail to meet their scheduled dispatch due to the market offer format’s limitations.
This study has significant implications for the energy sector, particularly for energy aggregators, market operators, and policymakers. As the electricity market continues to evolve, the integration of DERs will play a pivotal role in enhancing grid flexibility, reliability, and efficiency. Holzer’s research provides a robust framework for achieving this integration, paving the way for a more dynamic and responsive electricity market.
“Our findings highlight the importance of developing flexible and adaptive models that can accommodate the unique characteristics of DERs,” Holzer concluded. “This will be essential for unlocking the full potential of distributed energy resources in the wholesale electricity market.”
As the energy sector continues to evolve, the insights from this research could shape future developments in market design, grid management, and policy formulation, ultimately driving the transition towards a more sustainable and resilient energy system.