An Integrated Paradigm for the Management of Delivery Risk in Electricity Markets: From Batteries to Insurance and Beyond

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Golden, Colorado
Project Term:
08/05/2020 - 08/04/2023

Critical Need:

The grid relies on conventional bulk power plants to provide the flexibility to operate power systems reliably. These assets can guarantee available capacity except in rare events. The existing risk management strategy protects against those rare events and aligns well with conventional technologies. New risk management strategies are needed due to the shift in grid resources: intermittent renewable resources, distributed energy resources, and storage technologies. Management systems must be able to leverage all capabilities of these new technologies to maintain an economical and reliable grid. PERFORM projects aim to address that need by developing methods to quantify and manage risk at the asset and system levels for the grid.

Project Innovation + Advantages:

The National Renewable Energy Laboratory (NREL)-led project team will develop an operating paradigm that leverages flexibility from distributed and bulk resources to cost-effectively manage delivery risk of intermittent resources, like solar and wind. Flexibility from a limited number of Distributed Energy Resources (DERs) is offered in wholesale energy markets today, and the value of flexibility is not yet recognized for economic hedging of delivery risk. The project team will develop transparent and verifiable risk scores for DERs that combine insights from advanced artificial intelligence methods and domain expertise. The DER risk scores will quantify asset delivery risk and inform bidding and scheduling strategies of aggregators and utilities. NREL will design an incentive compatible flexibilty auction and novel insurance products that hedge delivery risk to recognize and leverage resource performance in a cost-effective, reliable manner. The team’s experts in actuarial sciences, electricity markets, and technology companies will build upon knowledge in risk management from the finance sector to propose rigorous solutions for the electric sector.

Potential Impact:

PERFORM projects will design methods and risk scores to clearly communicate the physical delivery risk of an energy asset’s offer and design grid management systems that organically capture uncertainty. These management systems will evaluate and hedge the system risk position to meet or exceed a baseline system risk index. This pursuit will achieve the following area impacts:


Optimal utilization of renewable and clean resources for all grid services improves grid reliability, reduces energy imports, and provides a sustainable path to energy independence.


When low- or zero-emission assets provide all grid products and services, grid operations are no longer reliant on legacy, carbon-heavy centralized generation assets, which enables the grid to absorb more clean resources.


Innovation in grid management will reduce consumer costs, increase the value of emerging technologies, and help achieve a clean and sustainable electric power sector. Merging risk techniques in power systems with those from finance and actuarial science enables further economic growth and redefines the role of electric power sector entities.


ARPA-E Program Director:
Dr. Jonathan Glass
Project Contact:
Michael Blonsky
Press and General Inquiries Email:
Project Contact Email:


Johns Hopkins University

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