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Due to the variability and limited predictability of wind power, wind producers participating in most electricity markets are subject to significant deviation penalties during market settlements, and system operators need to schedule additional reserve to balance the unpredicted wind power variations. This paper proposes a combined energy and regulation reserve market model to encourage wind producers to regulate their short-term outputs. With a reserve market designed with lower deviation penalties, wind producers can increase their revenue by optimally bidding in the energy and reserve markets to reduce their deviation penalties. Meanwhile, part of the intrahour wind variations, which would have appeared in the system energy balance, is diverted into the system regulation reserve. The system then benefits from facing less wind energy intrahour variations, demanding less short-term reserve for wind variations, and having additional fast, although variable, regulation reserve from wind plants, which are likely to enhance grid security and operations in high wind penetration scenarios. A test case is studied to demonstrate the effectiveness of the proposed market model and bidding strategy on increasing the wind plant revenue and grid security.
Liang et al. (Thu,) studied this question.