Impact of large-scale wind power penetration on incentive of individual investors, a supply function equilibrium approach

This paper investigates two problems: 1) the decision-making approach for an individual investor in a power market with the uncertainty of wind power generation, and 2) the impacts of expanding the penetration of wind energy on the profitability of the investment. To answer these questions, a comparison framework of two distinct investments is designed in which one is deterministic in a power market including only fossil-fuel generators, and another is uncertain in a power market with wind energy production. The power market is modeled as a supply function equilibrium (SFE), and a scenario-based model is implemented on the IEEE 30-bus system to deal with the uncertainty of wind energy. A novel approach, including error correction and the sensitivity analysis method, is introduced. The concept of conditional value at risk is applied to measure the investment risk. The results show that the wind speed prediction error and the wind probability density function variation create a very low impact on the final result. However, the load duration curve has a high impact on the decision-making problem. The proposed approach can address the ensured gained profit of an investment in an uncertain power market.