Research on Price Mechanism for Pumped-storage Power Station in Power System Including Large-scale

Wind Farms

WANG Rui，ZHANG Li-zi，Liu Dong-lin，Cheng Shi-jun School of Electrical and Electronic Engineering

North China Electric Power University Beijing, China

Abstract—To improve the energy utilization efficiency of power systems and solve the bottleneck problem of wind power development, the combined operation mode of wind power and pumped storage power could be adopted where there were some water resources. Based on the analysis the impact of large-scale wind power farm on the grid and the necessity of combined operation, considering the current price mechanism in China, this paper applies the incentive compatibility principle to propose the two-part electricity price for pumped-storage power station mode based on correctly guide the investment of power station and promoting the safe and economical operation of power system. It is able to encourage the combined mode. In the end, examples results show the two-part electricity price for pumped-storage power station can effectively encourage the combined operation mode and promote the wind power industry healthy development.

Keywords-wind power; combined operation; price mechanism; pumped storage power station

I. INTRODUCTION With the rapid development of modern industrial, the

demand for energy increased significantly, but the conventional energy sources available in earth become increasingly scarce. At the same time, large consumption of fossil fuels has caused increasingly serious pollution problems. Under the double constraint- energy supply and environment problems, reducing energy consumption of electric power system has become an important issue. In this background, the wind power as the representative of the new energy in recent years achieved rapid development worldwide.

In wind power and other renewable energy over conventional development, negative impact of large-scale wind farm to power system is also increasingly prominent: intermittency of wind power caused voltage fluctuations and flicker problems. In addition, the randomness of wind power brought many practical difficulties to the operator in doing generation scheduling. These two aspects of the constraints at this stage has become a bottleneck in the development of wind power. In addition, the wind power output characteristics of the anti-peaking make some thermal power run in low efficiency in the time of load valley, it’s largely offset the effects of wind power energy saving.

To improve the energy utilization efficiency of power systems and solve the bottleneck problem of wind power development, research institute at home and abroad have run a number of related research works. Using energy storage technology to solve those problems is the most intuitive program. Till now, combined operation of wind power and pumped storage power has universally acknowledged.

Based on this program, this paper research the best price mechanism for pumped-storage power station in power system including large-scale wind farms.

First, this paper established the optimization model of combined operation, the profit model of wind power enterprise and the profit model of pumped-storage power station. Then, based on the above analysis, using minimum energy consumption of power system as optimization objective, use safe operation of power system and all the parties involved in have increment gains as constraints, this paper established the optimization model. In the end, examples results show the two-part electricity price for pumped-storage power station can effectively encourage the combined operation mode and improve energy efficiency of power system.

II. BRIEF INTRODUCTION OF THE MECHANISM DESIGN THEORY

The mechanism design theory which has changed into the core part of mainstream economics was first founded by Leonid Hurwicz during the period of 60s ~70s in the 20th century, and further developed by Eric S. Maskin. It is widely used in monopoly pricing, optimal tax theory, contract theory, principal-agent theory, auction theory and many other fields etc., and has received the Nobel Prize in Economics in 2007. Many practical and theoretical issues, such as the formulation of rules or regulations, design of optimal tax system, administration, democratic elections, design of social system and so on can be classified as the issues of mechanism design.

The background of the mechanism design can be depicted as follows: the real world is not as ideal as that was envisaged by Adam Smith, there are always a variety of constraints, (like imperfect competition, incomplete information, externalities, public goods, increasing returns to scale, and inseparable commodities etc.), and they will inhibit the full play of the role of market. That is, the market always fails to work. The general

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problems discussed by this theory are: for one whatever given economic or social goal, in the decentralized decision-making conditions such as free choice, voluntary exchange, incompletely information and so on, whether there exists such an economic mechanism that will make the personal interests of participants in economic activities coordinate the goal as designer expected and how to design it. Through explaining individual incentive and private information, this theory greatly enhances our understanding of the nature of optimal allocation mechanism.

When the economical information is not complete, and it is impossible or unsuitable to control directly, people need to adopt decentralized decision-making approach to allocate resources or to make other economic decisions. As it is one normal state that personal interests are not consistent with social interests, so when the designers of the system or rules don’t know all personal information as well, the basic principle they must grasp is that the mechanism designed need to give each participant an incentive which can achieve the objectives set by designer when each participant chooses to maximize their own individual interests. That is incentive compatibility principle (ICP) of the mechanism design theory. In fact, ICP has been a core concept of the mechanism design theory or even the whole modern economics.

III. RELATED MODEL OF COMBINED OPERATION OF WIND POWER AND PUMPED STORAGE POWER

A. Description This paper established optimization model of combined

operation, profit model of wind power and pumped storage power station.

B. The optimization model of combined operation The ultimate goal of developing wind power and other

renewable energy is to reduce power system's dependence on fossil fuels and solve the environmental pollution problems. Therefore, this paper established a optimization model of combined operation, using minimize the energy consumption of power system as objective function. To simplify the analysis, the model used the peak, valley, midst three-time division method, and did not consider the network constraints.

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System constraints including power supply and demand balance constraints. In addition, consider the current economic situation, constraints also include tariff level is not rising.

Through with / without pumped storage power station power system quantitative analysis of energy consumption: in the absence of pumped storage power station system, in the low load periods, there exist the phenomenon of abandoned wind, mainly because the output characteristics of wind power make some thermal power units run in low efficiency, operator limits part of the wind power can get higher energy consumption efficiency. In the combined operation system, due to the complementary nature of technology of wind power and pumped storage power station, the wind power output limits can be alleviated to some extent, and total energy consumption appear more significantly reduced.

Therefore, we the need using some mechanisms to guide combined operation of wind power and pumped storage power. In the current market environment, power generation companies, independent power companies are decentralized decision-making. Therefore using price mechanism or other economic instruments can achieve better results.

C. The profit model of wind power enterprise The profit of wind power enterprise is the difference

between income and cost.

−×+×+×=∏ −−− ongridgwgongridpwpongridfwfw QPQPQP wpspsgwpwfwvwfw QPQQQCC −×−++×− )( (2)

psfwpsffwongridfw QQQQ −−− +−= )( (3)

pspwpsppwongridpw QQQQ −−− +−= )( (4)

psgwpsggwongridgw QQQQ −−− +−= )( (5)

)()()( wpsgwpspwpsfwps QQQQ −−−− ++= (6) 0)()()( =−++ −−−− wpspswpsgwpspwpsf QQQQ η (7)

Where w∏ is profit, fP , gP , pP are separately the price in

peak, midst and valley periods, ongridfwQ − , ongridpwQ − ,

ongridgwQ − are separately electricity on-grid when wind power

in peak, midst, valley periods. fwQ ， pwQ ， gwQ are

separately electricity of wind power in peak, midst and valley

periods, )( wpsfQ − , )( wpspQ − , )( wpsgQ − are separately electricity

of pumping water of pumped storage power station.

psfQ − , pspQ − , psgQ − are separately the electricity of pumped

storage power station. psη is the conversion efficiency of

pumped storage power station. fwC is the fixed fee per year,

vwC is variable cost of wind power. psP is the electricity price

of pumped storage power station and wpsQ − represent the

exchange power between wind power and pumped storage

power station.

D. The profit model of pumped storage power station The profit of pumped storage power station is also the

difference between income and cost.

)( wpsvpswpspsps QCQP −−− −×=∏ (8)

Where ps∏ is profit, )( wpsvps QC −− is the variable cost function of pumped storage power station.

IV. PRICE MECHANISM DESIGN FOR PUMPED-STORAGE POWER STATION BASED ON THE INCENTIVE COMPATIBILITY

PRINCIPLE The important aim of co-operation of wind power and

pumped-storage power station is to reduce the comprehensive energy consumption in power system, realize the sustainable development of electric power industry. About whether to participate in the co-operation in relevant policy system, the wind power enterprise and power grid enterprise two parties’ decision-making is dispersive and free. Whether to develop co-operation, the key is to follow the incentive compatibility principle. Accordingly, the design of price mechanism of pumped-storage power station should be based on the two sides win-win. Considering the two participants’ will, the co-operation will increase profits of all parties concerned, or at least make them not decline.

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0w∏ , 0ps∏ are separately the profit of wind power and pumped storage power station before combined operation.

V. EXAMPLES

A. Basic data In this part, we will use the established model of this paper,

contrast the energy consumption of power system in each price mechanism for pumped-storage power station, like one-part electricity price, one-part capacity price and two-part electricity price. Basic data show in the table below.

TABLE I. PRICES OF WP CONSIDERING POWER MARKET

Period Time Generate price(yuan/MWh)

Peak [7,11]∪[17,21] 1000 Midst [11,17]∪[21,23] 650 Valley [0,7]∪[23,24] 400

TABLE II. THE ELECTRIC POWER DEMAND, GENERATION COST AND OUTPUT OF WIND POWER IN PEAK, MIDST AND VALLEY PERIODS

Period Energy consumption of thermal power /（

yuan/ MWh）

Output of Wind power /GWh

Power demand /GWh

Peak 220 19 576 Midst 180 33 461 Valley 130 52 379

The electricity price of pumped-storage power station in each price mechanism show in the table below.

TABLE III. THE ELECTRICITY PRICE OF PUMPED-STORAGE POWER STATION

Period One-part electricity price

One-part capacity price

Two-part electricity price

Electricity price/（yuan/ MWh） 650 0 200

The installed capacity of pumped-storage power station is 7000MW. The conversion efficiency of pumped-storage power station is 75%. )( wpsvps QC −− equal 50 yuan/ MWh.

B. The optimal solution Based on the the optimization model established by this

paper, calculate the total energy consumption of power system in each price mechanism, The results shown in the following table.

TABLE IV. THE OPTIMAL SOLUTION

Unit:yuan One-part electricity price

One-part capacity price

Two-part electricity

price total energy consumption 242090000 242090000 240765000

0ww ∏−∏ 0 0 4500000 0psps ∏−∏ 0 0 12750000

Compared the calculation results from above table, the following conclusions can be drawn that the two-part electricity price for pumped-storage power station can guide the combined operation of wind power and pumped-storage power station, and improve energy efficiency of power system.

VI. CONCLUSION Based on the above analysis, using minimum energy

consumption of power system as optimization objective, remain stable of tariff level and safe operation of power system as constraints, set up the model of combined operation based on the incentive compatibility principle, and propose the two-part electricity price for pumped-storage power station mode based on correctly guide the investment of power station and promoting the safe and economical operation of power system. In the end, examples results show the two-part electricity price for pumped-storage power station can effectively encourage

the combined operation mode and improve energy efficiency of power system.

REFERENCES

[1] Wu Wancai and Li Hongze, "Externalities Theory-based Dynamic Benefit Analysis of Pumped Storage Power Stations, " Hydropower Automation and Dam Monitoring[F], vol.31, pp.1-4,Oct.2007.

[2] Han Fengwu and Meng Xiangsong, "An agent-based design of electricity bidding decision support system for pumped storage power station," in Proc.2009 International Conference on Industrial and Information Systems., pp.439-442.

[3] Li Peidong, Sun Wei and Meng Yamin, "United lease operation mode of pumped-storage power station in powermarket environment, "East China Electric Power[B], vol.33, pp. 33-35,Feb.2005.

[4] Wang Peng and Wu Suhua, "Research on Model and Mechanism of Large Consumers Direct-purchasing Based on Incentive Compatibility Principle," Proceedings of the CSEE[A], vol.29, pp.91-96, Apr. 2009.