2018 European Control Conference (ECC) June 12-15, 2018. Limassol, Cyprus Optimal Energy Reserve Procurement

Uncertainties from renewables and demands create power imbalances in real-time electricity markets. This paper studies the problem of procuring reserve services in forward capacity markets from diverse resources to cover imbalance signals \mathrm{e}^{\mathrm{t}}. We consider the reserve procurement problem in two scenarios: (a) \mathrm{e}^{\mathrm{t}} reveals itself causally, (b) \mathrm{e}^{\mathrm{t}} is revealed all at once by an oracle. Each case induces an optimal resource procurement cost. The ratio between the costs in these two cases is defined as the price of causality. It captures the additional procurement cost from not knowing the entire imbalance signal in advance. An upper bound on the price of causality is derived, and the exact price of causality is computed in some special cases. The algorithmic basis for these computations is set containment linear programming. A mechanism is proposed to allocate the procurement cost to agents that contribute to the aggregate imbalance signal. This allocation is fair, budget- balanced, and respects the cost causation principle. Our resultsare validated through simulation studies, where we explore the dependence of the price of causality on unit resource prices.