Network hosting capacity for renewables: an economic approach through bilevel optimization

Abstract

In the context of the very large amounts of renewable generation that governments around the world are encouraging to be integrated to power systems, we introduced, for the first time, a new concept named Market Hosting Capacity (MHC). This concept attempts to determine the maximum amounts of renewable generation that can be connected to a power system in a profitable fashion. Previous work has introduced and analyzed the renewable generation hosting capacity of electricity systems from a techno-economic perspective, considering the balancing and network challenges associated with a large-scale integration of renewables. In view of the deregulation of the electricity industry, this thesis investigates for the first time this concept from a market perspective and introduces the Market Hosting Capacity, considering the challenges of low energy prices and renewables investment cost recovery. To determine the MHC of a power network, a bi-level optimization model is developed, where the upper level maximizes the renewable generation capacity subject to its long-term profitability constraint and the lower level represents the market clearing process. Finally, this bi-level problem is re-formulated into a Mathematical Programming with Equilibrium Constraints (MPEC) problem and, in turn, into a Mixed Integer Linear Programing (MILP) problem. By using this new definition and mathematical program, we demonstrate that expanding network capacity may not always drive a higher MHC. Furthermore, in some conditions, the presence of congestion may be a stronger incentive to renewables investors to act and install renewable generation capacity. In other conditions though, and depending on the power system parameters, this may change, being network expansion a more attractive option to encourage and maximize renewables penetration. To study possible scenarios, we present 3 test networks with 2, 24 and 42 busses. The latter corresponds to an equivalent representation of the Chilean electricity network, in which we study the dilemma between expanding transmission capacity to the Atacama Desert to integrate solar power sources or, instead, save these network investments, allowing proliferation of local solar power sources around Santiago.