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Article: Discussion on decentralized ancillary service trading based on insurance theory

TitleDiscussion on decentralized ancillary service trading based on insurance theory
Authors
KeywordsAncillary
Decentralized optimization
Insurance theory
Power market
Reserve capacity
Issue Date2003
Citation
Dianli Xitong Zidonghue/Automation Of Electric Power Systems, 2003, v. 26 n. 20, p. 18-23+34 How to Cite?
AbstractIn power markets ancillary service is usually centrally handled. The system operator determines the required reserve capacity and purchases it from the reserve suppliers. The corresponding cost is allocated to consumers. This approach may lead to inefficiency and gaming in ancillary service markets. Is there any way that individual consumers can treat the reserve capacity through a decentralized decision-making approach? If so, how should each consumer make optimal ancillary service plan? With a decentralized approach, where each consumer tries to maximize his own benefit, could the maximal social welfare be obtained as its centralized counterpart? In this paper, conceptual study results on these issues are presented. Two cases are investigated. The first case aims at reducing electricity interruption risk of a specified consumer via asking a power supplier to improve generation reliability. The provider insurance theory is introduced to guarantee the improvement of generation reliability. In the second case, there are three participants in the market: a power supplier, a consumer (also the insured) and a reserve capacity provider (also the insurer). Reserve capacity is traded and the insurance policy used to enforce the liability of reserve capacity provider. It is shown that in both cases, once the consumer purchases a well-defined insurance policy, the latter will induce incentives for the insurer to provide the required level of reliability improvement or reserve capacity. With insurance policy, the consumer can reduce his expected outage loss and shift his risk to the risk-neutral insurer. It is proven that the suggested decentralized approach can yield maximal social welfare as well.
Persistent Identifierhttp://hdl.handle.net/10722/73488
ISSN
2015 SCImago Journal Rankings: 0.772
References

 

DC FieldValueLanguage
dc.contributor.authorChan, Cen_HK
dc.contributor.authorBi, Ten_HK
dc.contributor.authorWen, Fen_HK
dc.contributor.authorNi, Yen_HK
dc.contributor.authorWu, Fen_HK
dc.date.accessioned2010-09-06T06:51:47Z-
dc.date.available2010-09-06T06:51:47Z-
dc.date.issued2003en_HK
dc.identifier.citationDianli Xitong Zidonghue/Automation Of Electric Power Systems, 2003, v. 26 n. 20, p. 18-23+34en_HK
dc.identifier.issn1000-1026en_HK
dc.identifier.urihttp://hdl.handle.net/10722/73488-
dc.description.abstractIn power markets ancillary service is usually centrally handled. The system operator determines the required reserve capacity and purchases it from the reserve suppliers. The corresponding cost is allocated to consumers. This approach may lead to inefficiency and gaming in ancillary service markets. Is there any way that individual consumers can treat the reserve capacity through a decentralized decision-making approach? If so, how should each consumer make optimal ancillary service plan? With a decentralized approach, where each consumer tries to maximize his own benefit, could the maximal social welfare be obtained as its centralized counterpart? In this paper, conceptual study results on these issues are presented. Two cases are investigated. The first case aims at reducing electricity interruption risk of a specified consumer via asking a power supplier to improve generation reliability. The provider insurance theory is introduced to guarantee the improvement of generation reliability. In the second case, there are three participants in the market: a power supplier, a consumer (also the insured) and a reserve capacity provider (also the insurer). Reserve capacity is traded and the insurance policy used to enforce the liability of reserve capacity provider. It is shown that in both cases, once the consumer purchases a well-defined insurance policy, the latter will induce incentives for the insurer to provide the required level of reliability improvement or reserve capacity. With insurance policy, the consumer can reduce his expected outage loss and shift his risk to the risk-neutral insurer. It is proven that the suggested decentralized approach can yield maximal social welfare as well.en_HK
dc.languageengen_HK
dc.relation.ispartofDianli Xitong Zidonghue/Automation of Electric Power Systemsen_HK
dc.subjectAncillaryen_HK
dc.subjectDecentralized optimizationen_HK
dc.subjectInsurance theoryen_HK
dc.subjectPower marketen_HK
dc.subjectReserve capacityen_HK
dc.titleDiscussion on decentralized ancillary service trading based on insurance theoryen_HK
dc.typeArticleen_HK
dc.identifier.emailNi, Y: yxni@eee.hku.hken_HK
dc.identifier.authorityNi, Y=rp00161en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.scopuseid_2-s2.0-0037466829en_HK
dc.identifier.hkuros83113en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-0037466829&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume26en_HK
dc.identifier.issue20en_HK
dc.identifier.spage18en_HK
dc.identifier.epage23+34en_HK
dc.publisher.placeChinaen_HK
dc.identifier.scopusauthoridChan, C=33967492500en_HK
dc.identifier.scopusauthoridBi, T=6602683764en_HK
dc.identifier.scopusauthoridWen, F=7102815249en_HK
dc.identifier.scopusauthoridNi, Y=7402910021en_HK
dc.identifier.scopusauthoridWu, F=7403465591en_HK

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