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Micro-energy markets: The role of a consumer preference pricing strategy on microgrid energy investment

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  • Faber, Isaac
  • Lane, William
  • Pak, Wayne
  • Prakel, Mary
  • Rocha, Cheyne
  • Farr, John V.

Abstract

The fragility of the modern electrical grid is exposed during random events such as storms, sporting events and often simply routine operation. Even with these obvious flaws large utilities and governments have been slow to create robust solutions due to the need of large capital investments required to address the issues. In this light creative economic and engineering solutions are desired to finance the needed upgrades. Driven by the requirement to have uninterrupted power that meets customers desires this research focuses on linking consumer preferences to a type of energy source in order to best fulfill stakeholder priorities. This approach is in contrast to the current and prevalent lowest cost methods to producing and consuming energy. This research yields a preliminary ‘micro-energy market’ that consists of an energy network architecture, pricing methodology and mathematical template which quantifies potential economic inefficiencies. If exploited these inefficiencies could be used to fund investment into various energy sources that provide unmet needs such as reduced carbon footprint, renewable, quality, and local production. These inefficiencies can be best exploited within the structure of a microgrid. Identification of opportunities on this smaller scale can provide an incentive for producers to develop a robust set of production facilities of varying size and characteristics to meet the consumer preferences. A stochastic optimization model of a microgrid implementation for a small military installation is used to evaluate the effects of this pricing methodology. The energy production of the resulting microgrid would be optimized to meet consumer preferences and minimize economic inefficiency.

Suggested Citation

  • Faber, Isaac & Lane, William & Pak, Wayne & Prakel, Mary & Rocha, Cheyne & Farr, John V., 2014. "Micro-energy markets: The role of a consumer preference pricing strategy on microgrid energy investment," Energy, Elsevier, vol. 74(C), pages 567-575.
    • Handle: RePEc:eee:energy:v:74:y:2014:i:c:p:567-575
    DOI: 10.1016/j.energy.2014.07.022
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    2. Pau Lloret-Gallego & Mònica Aragüés-Peñalba & Lien Van Schepdael & Eduard Bullich-Massagué & Pol Olivella-Rosell & Andreas Sumper, 2017. "Methodology for the Evaluation of Resilience of ICT Systems for Smart Distribution Grids," Energies, MDPI, vol. 10(9), pages 1-16, August.
    3. Whei-Min Lin & Chung-Yuen Yang & Chia-Sheng Tu & Ming-Tang Tsai, 2018. "An Optimal Scheduling Dispatch of a Microgrid under Risk Assessment," Energies, MDPI, vol. 11(6), pages 1-17, June.
    4. Sousa, Tiago & Soares, Tiago & Pinson, Pierre & Moret, Fabio & Baroche, Thomas & Sorin, Etienne, 2019. "Peer-to-peer and community-based markets: A comprehensive review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 104(C), pages 367-378.
    5. Wang, Richard & Hsu, Shu-Chien & Zheng, Saina & Chen, Jieh-Haur & Li, Xuran Ivan, 2020. "Renewable energy microgrids: Economic evaluation and decision making for government policies to contribute to affordable and clean energy," Applied Energy, Elsevier, vol. 274(C).
    6. Yong Long & Yu Wang & Chengrong Pan, 2018. "Incentive Mechanism of Micro-grid Project Development," Sustainability, MDPI, vol. 10(1), pages 1-19, January.
    7. Tabar, Vahid Sohrabi & Jirdehi, Mehdi Ahmadi & Hemmati, Reza, 2017. "Energy management in microgrid based on the multi objective stochastic programming incorporating portable renewable energy resource as demand response option," Energy, Elsevier, vol. 118(C), pages 827-839.

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