A New Risk Assessment and Management Paradigm (NewRAMP) in Electricity Markets
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 proposed work offers a New Risk Assessment and Management Paradigm (NewRAMP). NewRAMP develops innovative approaches for quantifying the risk of individual assets based on their performance and ability to deliver on their assumed obligations. NewRAMP translates this risk to the system level to increase the efficiency of power system operation and planning in the presence of extensive market participation by “risky” assets. NewRAMP synthesizes ideas and theories from finance and insurance, operations research, power system engineering, and electricity market design into methodologies incorporating a risk-driven paradigm to achieve higher adoption of renewable resources and more efficient and reliable system operation. The proposed work will provide proof of concept that NewRAMP can manage system and individual asset risk in a manner far superior to current practice, as measured on metrics applied to the Southwest Power Pool (SPP) territory.
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.