Centralized volatility reduction for electricity markets

Khaled Alshehri; Subhonmesh Bose; Tamer Başar

doi:10.1016/j.ijepes.2021.107101

Centralized volatility reduction for electricity markets

Khaled Alshehri^*
, Subhonmesh Bose
, Tamer Başar

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

10 Scopus citations

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 language	English
Article number	107101
Journal	International Journal of Electrical Power and Energy Systems
Volume	133
DOIs	https://doi.org/10.1016/j.ijepes.2021.107101
State	Published - Dec 2021

Bibliographical note

Publisher Copyright:
© 2021 Elsevier Ltd

Keywords

Electricity markets
Insurance Contracts
Mechanism design
Wind energy

ASJC Scopus subject areas

Energy Engineering and Power Technology
Electrical and Electronic Engineering

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.ijepes.2021.107101

Cite this

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title = "Centralized volatility reduction for electricity markets",

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.",

keywords = "Electricity markets, Insurance Contracts, Mechanism design, Wind energy",

author = "Khaled Alshehri and Subhonmesh Bose and Tamer Ba{\c s}ar",

note = "Publisher Copyright: {\textcopyright} 2021 Elsevier Ltd",

year = "2021",

month = dec,

doi = "10.1016/j.ijepes.2021.107101",

language = "English",

volume = "133",

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TY - JOUR

T1 - Centralized volatility reduction for electricity markets

AU - Alshehri, Khaled

AU - Bose, Subhonmesh

AU - Başar, Tamer

PY - 2021/12

Y1 - 2021/12

N2 - 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.

AB - 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.

KW - Electricity markets

KW - Insurance Contracts

KW - Mechanism design

KW - Wind energy

UR - https://www.scopus.com/pages/publications/85111224051

U2 - 10.1016/j.ijepes.2021.107101

DO - 10.1016/j.ijepes.2021.107101

M3 - Article

AN - SCOPUS:85111224051

SN - 0142-0615

VL - 133

JO - International Journal of Electrical Power and Energy Systems

JF - International Journal of Electrical Power and Energy Systems

M1 - 107101

ER -

Centralized volatility reduction for electricity markets

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

UN SDGs

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Cite this