Interconnection-wide hour-ahead scheduling in the presence of intermittent renewables and demand response: A surplus maximizing approach

This paper describes a new approach for solving the multi-area electricity resource allocation problem when considering both intermittent renewables and demand response. The method determines the hourly inter-area export/import set that maximizes the interconnection (global) surplus satisfying transmission, generation and load constraints. The optimal inter-area transfer set effectively makes the electricity price uniform over the interconnection apart from constrained areas, which overall increases the consumer surplus more than it decreases the producer surplus. The method is computationally efficient and suitable for use in simulations that depend on optimal scheduling models. The method is demonstrated on a system that represents North America Western Interconnection for the planning year of 2024. Simulation results indicate that effective use of interties reduces the system operation cost substantially. Excluding demand response, both the unconstrained and the constrained scheduling solutions decrease the global production cost (and equivalently increase the global economic surplus) by $12.30B and $10.67B per year, respectively, when compared to the standalone case in which each control area relies only on its local supply resources. This cost saving is equal to 25% and 22% of the annual production cost. Including 5% demand response, the constrained solution decreases the annual production cost by $10.70B, while increases the annual surplus by $9.32B in comparison to the standalone case. (C) 2016 Elsevier Ltd. All rights reserved.