An Energy Imbalance Settlement Mechanism Considering Decision-Making Strategy of Retailers Under Renewable Portfolio Standard

Before the establishment of the spot electricity market in China, an energy imbalance settlement (EIS) mechanism has been proposed as a transitional solution to address the imbalances between actual consumption and contracted energy in the forward electricity market. It plays a crucial role in cultivating electricity retailers, maintaining the stability of the balancing account, and promoting a smooth transition to market-oriented reforms. Given this background, a novel EIS mechanism with a piecewise linear penalty pricing scheme is proposed, learning from the performance-based regulation (PBR) in distribution systems. For optimizing the parameters in the proposed EIS mechanism, a stochastic bilevel model is presented considering two kinds of stakeholders involved, namely the power exchange (PX) and retailers. In the upper-level model, an optimal parameter setting model for policymakers to minimize the variance of deposit in the balancing account of PX is presented. In the lower-level model, a decision-making tool for retailers under the renewable portfolio standard (RPS) is developed. As a self-balance measure of retailers, flexible demands are incorporated into the lower-level problem. Consumer psychology is applied to quantify customer consumption adjustments in response to the financial incentives given by retailers. The risk faced by the retailers is modeled using conditional value-at-risk (CVaR), taking into account the uncertainties associated with renewable energy production and customer demand. Simulation results of a provincial electricity market in China show that the proposed method can effectively motivate retailers to improve their imbalance management capability and assist policymakers in determining the parameters of the EIS mechanism. Besides, the proposed method provides insights into the impacts of parameter setting of the EIS mechanism on the behavior and performance of retailers.