Tuning of renewable energy bids based on energy risk management: Enhanced microgrids with pareto‐optimal profits for the utility and prosumers

Abstract

Abstract The increasing penetration of renewable energy sources (RES) and electric vehicles (EVs) demands the building of a microgrid energy portfolio that is cost‐effective and robust against generation uncertainties (energy risk). Energy risk may trigger financial risk in the local energy market, depending on bid values, cost of generation and price of upstream grid power. In this study, a microgrid energy portfolio is built based on adjustments to both the financial and energy risks. These risks are managed in two ways: (1) by pre‐tuning and prioritizing the bid prices for wind and solar energy sources based on their relative levels of energy risk as quantified through a conditional value‐at‐risk (CVaR) approach; and (2) by co‐optimizing the conflicting profits of the utility and prosumers using non‐dominated sorting particle swarm optimization (NSPSO) to obtain a risk‐adjusted Pareto‐optimal energy mix. Thus, the utility predicts the net power balancing cost from the scheduling time horizon, thereby moderating the adverse effect that the uncertainties in renewable energy could have on the collective welfare. The proposed method is tested on a grid‐connected CIGRE low‐voltage (LV) benchmark microgrid with solar and wind sources, microturbines, and EVs. The results demonstrate that the obtained portfolio is realistic, welfare‐optimized and cost‐efficient.