Firming Renewable Power with Demand

8 Environmental concerns have spurred greater reliance on variable re9 newable energy resources (VERs) in electric generation. Under current 10 incentive schemes, the uncertainty and intermittency of these resources 11 impose costs on the grid, which are typically socialized across the whole 12 system, rather than born by their creators. We consider an institutional 13 framework in which VERs face market imbalance prices, giving them an in14 centive to produce higher-value energy subject to less adverse uncertainty. 15 In this setting, we consider an "aggregator" that owns the production 16 rights to a VER’s output, and also signs contracts with a population of 17 demand response (DR) participants for the right to curtail them in real 18 time, according to a contractually specified probability distribution. The 19 aggregator bids a day ahead offer into the wholesale market, and is able 20 to offset imbalances between the cleared day-ahead bid and the realized 21 VER production by curtailing DR participants’ consumption according to 22 the signed contracts. We consider the optimization of the aggregator’s 23 end-to-end problem: designing the menu of DR service contracts using 24 contract theory, bidding into the wholesale market, and dispatching DR 25 consistently with the contractual agreements. We do this in a setting in 26 which wholesale market prices, VER output, and participant demand are 27 all stochastic, and possibly correlated. 28