A Functional Approach to Assessing Flexible Ramping Products' Impact on Electricity Market

The expected increase in penetration of renewables in the upcoming decade urges the electricity market to introduce new products - in particular, flexible ramping products - to accommodate their variability and intermittency. While CAISO and MISO are leading the design, it is not clear how such products may affect the electricity market. There has been extensive works investigating the cost incurred by variability and intermittency of renewables. In this paper, however, we are specifically interested in assessing how the new products distort the optimal energy dispatch by comparing to the case without such products. Such distortion may impose additional cost, which we term as the "distortion cost". Using a functional approach, we establish the relationship between the distortion cost and the key parameters of the new products, i.e., the up and down flexible ramping requirements. Such relationship provides valuable information in assessing the trend of the distortion cost with respect to the renewable penetration level. Fortunately, both theoretical analysis and simulation results suggest smartly choosing the parameters may significantly reduce the additional cost by avoiding the maximal distortion cost.