Determination of Optimal Electricity Reserve Requirements

The continuous and safe delivery of electricity is a matter of concern amongst almost everyone, from single customers at their homes to industry owners and transmission system operators. Due to the nature of electricity, the amount produced and consumed must be equal. If, for some unexpected reason, those two quantities are not equal then the system is imbalanced and load demand has to be shed. This occurrence is costly and undesired. The main tool that transmission system operators have to avoid it is to allocate electricity reserves and use them to balance up the system if required An alternative probabilistic formulation to the traditional deterministic “n-1” criteria is given in this thesis by using a stochastic programming framework. The solution of the optimization model indicates the total amount of reserves that must be allocated at the lowest possible cost. Moreover, two ways of accounting for the risk are discussed, namely the Loss of Load Probability (LOLP) and the Conditional Value at Risk (CVar) formulation. The scenarios are computed from a function of reserve needs which takes into account the power load demand forecast error, the wind production forecast error and the failures of the power plants. Finally, the usefulness of the methods is tested with data from West Denmark electricity area. The results show that the models are able to account for the market principles and provide reasonable levels of optimal reserves, with some room for improvement if the methodology is intended to be implemented in a real system.