Quantifying the Impact of Unpredictable Generation on Market Coupling

Abstract

Modeling Market Coupling using an agent-based approach, we compare two organizations: centralized versus decentralized. To perform this comparison we analytically study the impact of wind farm concentration and the uncertainty resulting from the increasing penetration of renewables on the total cost of procurement, market welfare and the ratio of renewable generation to conventional supplies. We prove that the existence and uniqueness of equilibrium depend on the number of interacting demand markets. In a decentralized organization, forecast errors heavily impact the behavior of the electrical system. Simulations show that suppliers have incentives to certify the forecast uncertainty of other markets. We analytically derive the uncertainty price that might be charged by a risk certificator depending on the required confidence level