Market Designs for Distribution Systems with High Renewable Penetration

The project aims to design electricity markets at the distribution system level of the electric power grid to accommodate the trend toward increased renewable energy based generation. The envisioned electricity markets will need to align the interests of so-called prosumers (electric power producers who are also electric power consumers) with overall system objectives. The long term aim of this research is to design and analyze markets to allow prosumers to be stakeholders and participants in achieving system objectives. In this specific project, the team designs mechanisms and markets for strategic prosumers to participate through an aggregator (whose role can also be performed by the distribution company) to provide three services - energy balance in the generator-to-home mode of operation, energy balance in the generator-to-grid mode of operation, and frequency regulation. By focusing interest on the intersection of the emerging power grid and market design, this project will also foster further research in developing a full theory and practice for the economics of the new power grid. Achievement of the project's objectives will, therefore, generate considerable momentum at the scientific, technological and economic levels to advance the functionality and harness the complexity of the new power grid, boosting American competitiveness and economy. Concrete educational and outreach plans including design of new courses and projects for undergraduate involvement in research are also provided.

Many markets and mechanisms that guarantee useful properties such as efficiency, revenue optimality, and truthful revelation, in spite of strategic selfish agents are known. However, electricity markets are unlike many other commodity markets since electricity is difficult to store and is regulated in the sense that it has to be available on demand. The markets for large scale renewable integration pose additional challenges including information asymmetry and bounded rationality among participants, possible negative impact on system stability, and operation across various time scales. These challenges require new research both in the power grid (e.g., to identify the effect on the stability of the grid in real time) and in economics (e.g., for mechanism design to ensure optimal actions and not just truthful reporting). A new ecosystem consisting of old and new entities will emerge and their interfaces will have to be designed. This project focuses on design of markets and mechanisms for the crucial interface between the aggregator and the prosumers. The project explicitly considers the impact of information assymetry, limited computational capabilities, and effect on stability of the power grid. Many insights will be portable to other interactions, including between the ISO (independent system operator) and multiple aggregators as well as a commercial EV (electric vehicle) charging stations that wish to engage in arbitrage of energy using batteries of its customers. By unifying techniques from economics, power systems, control theory, and dynamical systems, this proposal takes aim at a high-risk high-reward problem crucial for ensuring a future with large scale distributed renewable integration.