Incentives for Optimal Integration of Fluctuating Power Generation

The present paper investigates how a storage unit, coupled with a wind farm could influence the economic operation of the power system. For this reason two optimization algorithms are implemented, where the storage capacity is assigned certain costs and is able to vary in size. The objective of the first optimization is to identify the optimal power infeed as well as the necessary battery capacity in order to maximize the profits of the wind farm. The objective of the second optimization is to identify the necessary battery capacity, which in relationship with the wind power infeed will minimize the total costs of the system. The wind farm is assumed to provide “cheap” energy to the network and has no knowledge of the effects its power infeed has on the Locational Marginal Prices (LMPs) it receives. It has been found that for small wind farms, which cannot influence the LMPs with their infeed, the maximum profit policy coincided with the power infeed policy for the minimization of the costs. On the contrary, the wind farm could not identify the optimal policy which would maximize its profits, when its size is big enough to influence the LMPs. Incentives are identified so that the wind farm can receive a price signal which will be of benefit for both the wind farm and the system.