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Estimating the Operating Reserve Demand Curve for Efficient Adoption of Renewable Sources in Korea

Author

Listed:
  • Wooyoung Jeon

    (Department of Economics, Chonnam National University, Gwangju 61186, Republic of Korea)

  • Jungyoun Mo

    (Department of Economics, Chosun University, Gwangju 61452, Republic of Korea)

Abstract

As the proportions of variable renewable sources (VRSs) such as solar and wind energy increase rapidly in the power system, their uncertainties inevitably undermine power supply reliability and increase the amount of operating reserve resources required to manage the system. However, because operating reserves have the characteristics of a public good and their value is related to the social cost of blackouts, it is difficult to determine their market price efficiently, which leads to inefficiencies in procuring operating reserves. This study estimates the operating reserve demand curve (ORDC) of the Korean power system to provide an effective basis for measuring the proper value and quantity of operating reserves needed to meet the reliability standard. A stochastic dynamic optimization model is applied to incorporate the probabilistic characteristics of VRS and the inter-hour constraint, which is necessary for analyzing load-following reserves. An econometric model and the Monte Carlo simulation method are used to generate the forecast profiles of solar and wind generation. The results indicate that the proper amount of hourly operating reserves needed in 2034 is approximately 4.4 times higher than that in 2020 at the current reserve offer price. The ORDC of 2020 has a price-inelastic shape, whereas the ORDC of 2034 has a price-elastic shape because the reserve requirement varies considerably with its offer price level in the high-VRS penetration case. This variability is due to alternatives, such as VRS curtailment or load shedding, which can replace the reserve requirement. This study also showed that VRS curtailment is an effective balancing resource as an alternative to reserves.

Suggested Citation

  • Wooyoung Jeon & Jungyoun Mo, 2023. "Estimating the Operating Reserve Demand Curve for Efficient Adoption of Renewable Sources in Korea," Energies, MDPI, vol. 16(3), pages 1-12, February.
    • Handle: RePEc:gam:jeners:v:16:y:2023:i:3:p:1426-:d:1053645
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    References listed on IDEAS

    as
    1. Wooyoung Jeon & Sangmin Cho & Seungmoon Lee, 2020. "Estimating the Impact of Electric Vehicle Demand Response Programs in a Grid with Varying Levels of Renewable Energy Sources: Time-of-Use Tariff versus Smart Charging," Energies, MDPI, vol. 13(17), pages 1-22, August.
    2. Frew, Bethany & Brinkman, Greg & Denholm, Paul & Narwade, Vinayak & Stephen, Gord & Bloom, Aaron & Lau, Jessica, 2021. "Impact of operating reserve rules on electricity prices with high penetrations of renewable energy," Energy Policy, Elsevier, vol. 156(C).
    3. Bajo-Buenestado, Raúl, 2021. "Operating reserve demand curve, scarcity pricing and intermittent generation: Lessons from the Texas ERCOT experience," Energy Policy, Elsevier, vol. 149(C).
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