# Pricing Energy in the Presence of Renewables

**Authors:** Ashkan Zeinalzadeh, Indraneel Chakraborty, Vijay Gupta  
**arXiv:** [1611.08006](https://arxiv.org/abs/1611.08006)  
**Date:** 2016-11-23  
**Summary page:** https://www.summarizepaper.com/en/paper/1611.08006v1/

## Key points

- Authors address significant externalities imposed by renewable power producers on non-renewable energy producers in electricity markets
- Intermittent nature of renewable energy production requires reliance on non-renewable sources for consistent power delivery
- Implicit insurance mechanism provided by non-renewable sectors to consumers is currently unpriced, resulting in hidden monetary transfer from non-renewable to renewable producers
- Proportion of renewable energy supplied increases, so do these externalities
- Authors develop a model for determining market clearing price of energy in the presence of renewables
- Study focuses on day-ahead electricity market where both types of generators submit bids with asking prices per unit of energy to an independent system operator (ISO)
- ISO uses multi-stage stochastic optimization to dispatch energy efficiently, minimizing costs for consumers
- Incorporation of load variance using Conditional Value-at-Risk (CVAR) measures ensures generators can meet load requirements within desired confidence levels
- Relationship established between market clearing price of energy and CVAR, showing how higher penetration levels of renewables may increase this price point
- Research provides valuable insights into understanding and quantifying interactions between renewable and non-renewable energy sources within evolving power systems

## Summary

In their paper titled "Pricing Energy in the Presence of Renewables," authors Ashkan Zeinalzadeh, Indraneel Chakraborty, and Vijay Gupta address the significant externalities imposed by renewable power producers on non-renewable energy producers in electricity markets. The authors highlight how the intermittent nature of renewable energy production necessitates reliance on non-renewable sources to ensure consistent power delivery meeting quality standards. This implicit insurance mechanism provided by non-renewable energy sectors to consumers is currently unpriced, resulting in a hidden monetary transfer from non-renewable to renewable producers. As the proportion of renewable energy supplied increases, so do these externalities. To quantify these impacts, the authors develop a model for determining the market clearing price of energy in the presence of renewables. Their study focuses on a day-ahead electricity market where both renewable and non-renewable generators submit bids with asking prices per unit of energy to an independent system operator (ISO). The ISO's task involves multi-stage stochastic optimization to dispatch energy efficiently from each generator, minimizing costs for consumers. By incorporating the concept of load variance using Conditional Value-at-Risk (CVAR) measures, they ensure that generators can meet load requirements within desired confidence levels. Through analytical derivations, the authors establish a relationship between the market clearing price of energy and CVAR. They demonstrate that higher penetration levels of renewable energies may lead to an increase in this price point, shedding light on how renewables impact pricing dynamics in electricity markets. This research contributes valuable insights into understanding and quantifying the complex interactions between renewable and non-renewable energy sources within evolving power systems.