An Integrated Dynamic Market Mechanism for Real-Time Markets and Frequency Regulation

The intermittent and uncertain nature of renewables represents a major challenge for large scale adoption of sustainable energy resources. Of particular concern is the need to maintain both quality of grid frequency and low costs of regulation reserves in the face of increasing fluctuations in renewables. To this end, we propose an integrated dynamic market mechanism (DMM), which combines real-time market and frequency regulation allowing market players, including renewable generators and flexible consumers, to iteratively negotiate electricity prices at the wholesale level while using the most recent information on the available wind power and the quality of grid frequency. Main features of the integrated DMM are as follows: 1) a Newton-Raphson-based method, which leads to fast convergence to the optimal dispatch; and 2) use of an aggregated frequency error as a feedback signal for the negotiation process, which leads to reduced regulation capacity requirements. The benefits of this DMM are illustrated via simulations on the IEEE 118 bus system.