A Comparative Study of Electricity Price Variations

with Wind Energy Penetration

Avinash D.

Shelly Vadhera

M. Tech. student, Electrical Engineering Department

National Institute of Technology, Kurukshetra
Haryana, India
avinash.6474@yahoo.co.in

Assoc. Prof., Electrical Engineering Department

National Institute of Technology, Kurukshetra
Haryana, India
shelly_vadhera@rediffmail.com

AbstractThis paper aims to compare the effect of wind

energy penetration on electricity prices by considering different
levels of installed wind capacities. The market clearing problem
is formulated as a two stage stochastic optimization problem,
where the first stage represents the clearing of the market with
scheduled wind production and the second stage models the
balancing market operations with different possible wind energy
scenarios. A comparison is made between the size of the system
and the price variations by taking three different test systems.
KeywordsLocational marginal prices (LMPs), stochastic
programming, wind energy.

I.

INTRODUCTION

The amount of wind generation is rapidly increasing in all

the electric energy systems, according to GWEC report [1] the
total installed wind energy all over the world could reach 2000
GW by 2030. This makes all electricity markets to consider
the wind energy in market clearing operations. Electricity
markets for short term energy transactions usually comprises
of two trading stages such as day-ahead stage and balancing
stage. In day ahead stage the market determines the production
level of each generating company and the price for each hour
in the upcoming 24 hour period where as the balancing market
operations are carried at the actual time of load dispatch, to
settle the unscheduled load variations or the other
uncertainties.
Hence the market clearing problem can be formulated as a
two stage stochastic programming problem where the first
stage represents the day ahead market operation and the
second stage represents the balancing market operation [2].
The increased penetration of wind energy introduces
uncertainty into the system, which can be modeled using
probabilistic methods [3]. The technique of stochastic
programming is initially applied to unit commitment
considering outages of generation in [4] and further extended
in [5] to determine the spinning and non spinning reserves in a
power system with wind producers. As the wind uncertainty
increases the system operator has to make sure that the
sufficient reserve is present in the system to cope up with the
variations, reserve margin planning is discussed in [6]
including the hydro systems, in [7] the problem is considered
by adding generator outages, wind and load forecasts. The
impact of correlation between the two wind farms on

locational marginal prices (LMPs) is discussed in [8]. In this

paper the market clearing algorithm is based on single auction
mechanism where only generating companies submits bids to
the market and dc power flow is used in the optimization
problem. In the balancing stage several wind energy scenarios
are considered, which are different from the scheduled one in
the day ahead market, to find the effect of uncertainties on
system LMPs. In this the prices are derived as the dual
variables of the power balance constraints of a linear
programming problem [2], which is a simple and robust
method.
This paper is organized as follows. Section II gives a brief
introduction to the stochastic programming, section III
describes the modeling of the method used to clear the
electricity market, section IV presents the results for IEEE 14
bus, 24 bus and 30 bus systems and section V concludes the
paper.
II.

STOCHASTIC PROGRAMMING

A. Motivation
Power system operation always consists of some level of
uncertainty in the form of load variation, faults and some other
unexpected outages. With the inclusion of the wind power in
the system the level of uncertainty is further increased, this
uncertain data is represented as a possible set of scenarios with
some weights and used as an input data to the optimization
problem. This represents the stochastic programming
technique.
B. Modelling
The expression for two stage linear
programming is given by equations (1) to (3)

stochastic

Minimize

z = cT x + F {Q(s )}

(1)

Subject to

Ax = B

(2)

x X

(3)

Where

Q(s ) is given by equations (4) to (6)

q ( s )T y ( s )

Minimize

(4)

T (s )x + W (s ) y (s ) = h(s )

Subject to

(5)

y (s ) Y , s S
(6)
where x and y (s ) are the first and second stage decision
variables, c, q ( s ), B, T ( s ),W ( s ), h( s ), A are the known
vectors and matrices which are in appropriate size,
s represents the scenario index and S represents the set of all
possible scenarios.
III.

METHODOLOGY

The method described by equations (1) to (6) is applied to

clear the electricity market comprising of two stage operation.
The algorithm of the proposed method is as follows
A. Algorithm
All the participating generators submit bids to the
market operator for day ahead stage, which is cleared
as the first stage variable, in this method load is
assumed to be constant for a single period time for
which it is considered
The bidding for reserve is included as the simultaneous
trading [9] and the scheduled wind energy is
considered in the day ahead market.
The formulation consist of several scenarios of wind
energy deviations, which may occur at the actual time
of energy delivery, with certain probabilities
Thus the solution consists of marginal clearing price at
day ahead stage and also the price for each scenario
B. Formulation
Minimize

C P + C
k k

RU
k

k K

RkU + CkRD RkD + s CkU rksU CkD rksD

sS

k K

+ s Vl LOL Lshed
ls
s S
lL

(7)

Subject to

Pk Pkmax , k
U
ks
U
ks
0
n

(10)

D
ks
D
ks
0
m

Pk + r r 0, k , s
Pk + r r Pkmax , k , s
max
bnm Cnm
, (n, m ) ,
max
bnm ( ns ms ) Cnm
, (n, m ) , s
U
u max
0 Rk Rk , k
0 RkD Rkd max , k
rksU RkU , k , s
rksD RkD , k , s
Lshed
Ll , l , s
ls

spill
qs

(11)
(12)

(13)
(14)
(15)
(16)
(17)
(18)
(19)

Wqs , q, s

(20)

min
k

(21)

Pk P , k
rksU , rksD 0, k , s
sh
q
shed
ls
0
n free

spill
qs

(22)

0, q;W

0, l , s
n; ns free n, s

0, q, s

(23)
(24)
(25)

where (7) represents the expected cost of power system

operation which is to be minimized, K is the set of generating
RU
RD
U
D
units, Ck , Ck , Ck , Ck , Ck are the production cost,
upward/downward reserve costs, increasing/decreasing costs
of producer k at balancing stage respectively.
Pk , RkU , RkD , rksU , rksD represents the power generation, reserve
up/reserve down, and the increased/decreased generation at
balancing stage of a unit k, where s represents the considered

s is the probability of scenario s where Vl LOL is

the value of lost load at a load point given by the set L ,
Lshed
is the amount of load shed in a scenario s . Equations
ls
scenario.

(8) and (9) are the power balance constraints at day ahead and
balancing stages respectively, where n, m both represent the
index of nodes in the system and q is used to represent the
index of wind farms. The dual variables associated with these
equations are n , ns which give the marginal prices in day

P + W

sh
q

k nK

q Qn

(r

U
ks

l nL

) L

nm

0
n

b (
nm

m nM

0
n

m0 ) = 0

: n , n

shed
ls

l nL

b (

m nM

rksD +

k nK

(W

qs

Wqsh Wqsspill

q Qn

ns m0 + ms = 0 : ns , n, s

(8)

ahead and balancing market stages. The notation n is used

as the set which relates between the set and the set of nodes
( n ) for e.g.
node n .

(9)

nK is the set of generators connected to the

Wqsh ,Wqs are the scheduled wind energy and the

spill

actual wind energy generated during the scenario s , Wqs is

the wind energy that is spilled because of line flow
0
constraints, bnm , n , ns represents the susceptance in per unit
value, phase angle of the buses at day ahead stage and also at
balancing stage in each scenario respectively. Equations (13)

and (14) are the line flow constraints where

max
Cnm
is line flow

limit between the nodes n and m . K , L, Q represent the set

of generators, loads and wind farms present in the system and
set gives the information about interconnected lines.
C. Assumptions
It is assumed that the cost of wind energy generation is
zero and hence it is not considered in the optimization
problem
The fuel cost of the generators is considered as a piece
wise linear curve to perform the optimization as a
linear programming problem
The forecasted load is assumed to be constant for the
time of operation
IV.

RESULTS

The method described in section III was implemented on

the General Algebraic Modeling System (GAMS). The
problem was formulated as a linear programming problem and
solved using CPLEX 12.1.0 under GAMS.
A. 14 Bus System
The IEEE 14 bus test system is considered from [10] and
the wind farm is connected at node 14 as in [11]. The total
demand of the system is 259 MW and the system consists of 2
generators, 20 lines, 3 synchronous condensers and 11 load
points. The scenarios for wind energy can be obtained from
past historical data, in this paper the data given in [12] is used
to obtain the probabilities of scenarios. The cost data for the
generators (including 24 and 30 bus systems) is taken from
[13], initially, in the day ahead market stage the system is
cleared by taking some scheduled wind energy and then in the
actual time of energy delivery, two scenarios of wind energy
deviations are considered which are indicated by low and high
wind energy scenarios. It is to be noted that in Tables I to VI
case I represents low wind energy scenario and case II
represents high wind energy scenario. This process is tested
for two cases of different installed wind farm capacities of
12.3% and 26.3% of total system demand as in [2], prices for
12.3% penetration of wind energy are given in Table I
TABLE I. MARGINAL PRICES IN DAY AHEAD AND BALANCING STAGES FOR
12.3% OF WIND ENERGY PENETRATION IN 14 BUS SYSTEM
Node

Day ahead market cleared price

($/MWh)

Case I
price
($/MWh)

Case II
price
($/MWh)

10.89

10.89

10.89

10.89

10.89

10.89

10.89

10.89

10.89

10.89

10.89

10.89

12

10.89

10.89

10.89

14

10.89

10.89

10.89

Since the installed wind capacity is of low value (31.86 MW)

with comparison to the system demand, the price variation in
the above case is zero in all scenarios. Table II gives the data
for a wind energy penetration level of 26.3% (68.12 MW). In
this the cost at node 14 is decreased because of additional
increase in the wind energy but in case II operation, the energy
from wind farm is high enough to create congestion in the
system (due to line flow constraints) hence at node 14 the cost
is almost zero and at node 12 it is reaching a high value. In
Fig. 1 the variations of price from 12.3% to 26.3% wind
energy penetration in the case of high wind scenario is shown.
TABLE II. MARGINAL PRICES IN DAY AHEAD AND BALANCING STAGES
FOR 26.3% OF WIND ENERGY PENETRATION IN 14 BUS SYSTEM
Node

Day ahead market cleared price

($/MWh)

Case I
price
($/MWh)

Case II
price
($/MWh)

10.89

10.89

10.89

10.88

10.89

10.84

10.49

10.89

08.92

10.32

10.89

08.03

12

11.90

10.89

15.94

14

08.71

10.89

Fig. 1. Price variations in high wind scenario from 12.3% to 26.3% wind
energy penetration in IEEE 14 bus system

B. 24 Bus System
This system is taken from the single area version of the
IEEE Reliability Test System, 1996 [14] which consists of
2850 MW as the system demand supplied by 12 generators
through 34 lines. The wind farms are connected at nodes 7 and
8 as in [2]. Table III gives the prices of this system for a wind
energy penetration of 12.3% (350.55 MW), thus the total
capacity of wind farms is around 350 MW having 140 wind
turbines rated at 2.5 MW each [2].
TABLE III. MARGINAL PRICES IN DAY AHEAD AND BALANCING STAGES
FOR 12.3% OF WIND ENERGY PENETRATION IN 24 BUS SYSTEM
Node

Day ahead market cleared price

($/MWh)

Case I
price
($/MWh)

Case II
price
($/MWh)

20.70

26.11

13.32

20.70

26.11

13.32

Node

Day ahead market cleared price

($/MWh)

Case I
price
($/MWh)

Case II
price
($/MWh)

20.70

26.11

13.32

20.70

26.11

13.32

20.70

26.11

13.32

15

20.70

26.11

13.32

24

20.70

26.11

13.32

For this case there is no congestion in the network and hence

the price level is same across all nodes, as the wind energy
increased from low scenario (case I) to high scenario (case II)
the cost of the system is decreased from 26.11 $/MWh to
13.32 $/MWh. The price details for a wind energy penetration
level of 26.3% are given in Table IV. In this case because of
the increased wind energy penetration (750 MW) and because
of the line flow constraints, congestion is created in the system
and hence the price variations which are as shown below.
TABLE IV. MARGINAL PRICES IN DAY AHEAD AND BALANCING STAGES
FOR 26.3% OF WIND ENERGY PENETRATION IN 24 BUS SYSTEM

details of system considering two levels of wind energy

penetration.
TABLE V. MARGINAL PRICES IN DAY AHEAD AND BALANCING STAGES FOR
12.3% OF WIND ENERGY PENETRATION IN 30 BUS SYSTEM
Node

Day ahead market cleared price

($/MWh)

Case I
price
($/MWh)

Case II
price
($/MWh)

13.32

23.11

12.52

13.32

23.11

12.52

13.32

23.11

12.52

11

13.32

23.11

12.52

14

13.32

23.11

12.52

27

13.32

23.11

12.52

TABLE VI. MARGINAL PRICES IN DAY AHEAD AND BALANCING STAGES FOR
26.3% OF WIND ENERGY PENETRATION IN 30 BUS SYSTEM
Node

Day ahead market cleared price

($/MWh)

Case I
price
($/MWh)

Case II
price
($/MWh)

Day ahead market cleared price

($/MWh)

Case I
price
($/MWh)

Case II
price
($/MWh)

12.52

17.21

12.52

Node

13.32

18.54

12.52

13.32

20.93

11.09

13.26

18.45

12.52

13.44

20.93

11.73

11

13.21

18.37

12.52

11.10

20.93

14

13.19

18.34

12.52

11.10

20.93

27

13.22

18.38

12.52

12.93

20.93

09.17

15

13.20

20.93

10.52

24

13.17

20.93

10.36

Fig. 3. Price variations in low wind scenario from 12.3% to 26.3% wind
energy penetration in IEEE 30 bus system

Fig. 2. Price variations in high wind scenario from 12.3% to 26.3% wind
energy penetration in IEEE 24 bus system

In Fig. 2 the variations of price from 12.3% to 26.3% wind

energy penetration in the case of high wind scenario is shown.
C. 30 Bus System
This system is taken from [10], according to [15] the wind
farm is connected at node 7. This system has a total demand of
283.4 MW which is distributed through 21 load points and
supplied by 6 generating units. Tables V and VI give the price

In the second case of the above system, initially congestion is

created between the nodes 1 and 2 hence in day ahead and
case I operations, there is a variation of prices among the
nodes but in case II operation, congestion is removed because
of extra energy flow from wind farm and thus the price
variations are removed. In this system due to congestion, low
wind scenario prices shown predominant variations from
12.3% to 26.3% wind energy penetration as shown in Fig. 3.
V.

CONCLUSIONS

This paper gives a comparison of prices for different

systems considering the different scenarios of wind energy
penetration. Here it is seen that the increased penetration of
wind energy decreases the system cost but increases the price

variation among the nodes. Future work can be extended to

add all the start up and shut down costs of the generators in the
objective function and also a 24 hour load pattern can be
considered in place of a constant load.

[7]

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