Market design for system security in low-carbon electricity grids: from the physics to the economics

System security is a critical component of power system operation. The objective of operational security is to manage grid stability and to limit the interruption to customer service following a disturbance. The integration of inverter-based renewable generation technologies such as solar and wind in the generation mix has introduced new challenges for managing operational security. First, the intermittency inherent in renewable resources can impact on key power system parameters such as frequency and voltage. Second, renewables interface with the grid through power electronics rather than turbines, which means that the physical characteristics of turbine generation that have historically supported the stability of the grid are becoming scarce as the power system transitions away from fossil‑fuel based thermal generation. In this paper, using public good theory, we provide an economic characterisation of the system services necessary for power system security.  The analysis illustrates that, as opposed to a standard ‘public goods’ characterisation, system security products are better viewed as a basket of goods with differing economic characteristics that can also vary over space and time. The implications of these classifications for market design is analysed, including the inseparability of certain products, the binary or unit-commitment based nature of certain products, and the interactions between procurement mechanisms, network access rights and investment. Finally, we highlight five emerging models of market design for system security that reflect the nuances of economic characterization while respecting the physical characteristics of the grid.

By: Farhad Billimoria , Pierluigi Mancarella , Rahmat Poudineh