Cost allocation of spinning reserve based on risk contribution

Current cost allocation methods require generating companies (GENCOs) to afford spinning reserve (SR) costs according to their energy production rather than the impact on grid stabilization. The differences in generator reliability and forecast accuracy of renewables cause difficulty in quantifying the contribution of individual factors on the SR requirements (SRRs). First, this paper employs a reliability-constrained unit commitment (RCUC) model to determine the SRR and SR costs according to the grid reliability. Then, a cost allocation method is proposed to allocate these SR costs based on risk contribution theories. The risk contribution theories, marginal contribution, and stand-alone contribution are employed to measure the effect of individual risk factors on grid safety. The cost allocation method is demonstrated and discussed in the IEEE-RTS. The proposed risk contribution method can quantify the impacts of risk factors on grid safety and allocate SR costs into them according to their contributions. Additionally, this risk-based cost allocation method can encourage GENCOs to enhance the reliability level of generators and continuously improve the forecast accuracy of renewables to lower SR costs. (c) 2015 Institute of Electrical Engineers of Japan. Published by John Wiley & Sons, Inc.