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Pricing and capacity allocation in renewable energy

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  • Li, Xin
  • Chen, Hsing Hung
  • Tao, Xiangnan

Abstract

Power systems that plan to replace generation of energy from conventional sources to renewable sources need to increase flexibility. While most demand side management (DSM) models are limited to load shedding, as communications technology develops, using a DSM model that includes load shifting is becoming feasible. Our study focuses renewable energy management with a DSM model that contains two M/M/s queues: queue 1 for renewable and queue 2 for fossil-fired energy. As the queue length for renewable energy increases, new customers who had originally wanted renewable energy service may opt for fossil-fired energy service. Due to this behavior, having dependent M/M/s queues is more realistic than independent ones. The service provider can maximize profit by allocating server capacity and setting pricing for each kind of service. Besides, we propose a coordination policy: when there are m customers in the queue of renewable service and some fossil-fired energy servers are available, the service provider invite the first customer of the queue of the renewable energy service to be served in the fossil-fired energy server but the price charged to the customer will be the low price. Sharing resources between the two kinds of service can improve service system utilization, so as to benefit both the service provider and customers.

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  • Li, Xin & Chen, Hsing Hung & Tao, Xiangnan, 2016. "Pricing and capacity allocation in renewable energy," Applied Energy, Elsevier, vol. 179(C), pages 1097-1105.
    • Handle: RePEc:eee:appene:v:179:y:2016:i:c:p:1097-1105
    DOI: 10.1016/j.apenergy.2016.07.065
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