C I R E D CIRED Seminar 2008: SmartGrids for Distribution Frankfurt, 23 - 24 June 2008 Paper 100 FORMULATION OF PRICING MECHANISM FOR MICROGRID ENERGY Arup SINHA Rabindranath LAHIRI Somenath BYABORTTA Tata Consultancy Services Ltd– India Tata Consultancy Services Ltd– India Tata Consultancy Services Ltd– India arup.sinha@tcs.com rn.lahiri@tcs.com somenath.byabortta@tcs.com Shyamapada CHOWDHURY Sunetra CHOWDHURY Peter CRUSSLEY Jadavpur University– India Women’s Polytecnic– India University of Manchester – UK spchowdhury63@yahoo.com.com sunetra69@yahoo.com.com p.crossley@manchester.co.uk ABSTRACT Interconnection of various low voltages, small-scale distributed generators (DGs), energy storage devices and controllable loads interfaced through fast acting power electronic devices in an isolated remote area forma a microgrid as islanding operation where conventional grid is not available. Combined heat and power (CHP) produced by DGs may be utilized in the local market making the Micro grid most efficient and economic. Like deregulation regime in conventional power market, multi agent generator providers also may be considered to make the Microgrid market equal competitive. The basic objective of a competitive electricity market is to serve the consumers at a reduced price. The objective of this paper is to analyze and propose the pricing mechanism for Microgrid energy in the competitive electricity market where the Microgrid Central controller (μcc) is made to participate in the bidding process to finalise pricing mechanism). Two important market settlement techniques, Day-ahead and Real-time, have been considered with the marketing strategies of renewable DGs like Photovoltaic (PV) and wind generation introduction INTRODUCTION U NBUNDLING is happening very fast in electricity sector since last decade , onwards to decentralise the control in all three section of Power systems like Generation, Transmission & Distribution to a distributed control regime in all over world especially in the geographically remote areas where erection of conventional grid network either not feasible or economical. Microgrid is a concept where local energy potentials in remote areas, both in renewable (such as small wind, PV, etc.) and non-conventional (micro-turbine, Fuel cells, Diesel generator) resources, are tapped and interconnected among themselves to form a LV utility system. These small DGs have different owners, supply loads locally with the help of local controllers (μc). μC takes decisions – scheduling of Generation as per load forecast (i.e., unit commitment) and Economic dispatch of connected with each DG and Microgrid Central Controller (μcc). In the islanding operation of Microgrid, each source caters only those loads, which are stipulated for the source. But when these sources are connected with the micro grid, which is most desirable, and then the action of the controllers (both μ c and μcc) should have a certain degree of intelligence for participation in the common and competitive market. The purpose of the Energy Management System (EMS) in the Microgrid scenario is to make decisions regarding the best use of the generator for producing Electricity and heat i.e. combined heat and power (CHP) operation. Such decisions will be based upon the heat requirements of the local establishments, the climate, the price of electric power, the cost of fuel and many other considerations. The central controller (μcc) acts as a main operator to take decisions regarding the supply of CHP services to be provided as per demand. Like deregulated regime in the conventional utility grid, multi-agent generating providers are considered in the Microgrid system. The main idea of this paper is to determine the pricing mechanism at the common BUS levels to facilitate the supply & demand of an aggregated group of different kinds of DGs and an aggregated group of different kinds of consumers respectively. These consumers are categorized as controllable loads (which can be shed) and uninterruptible loads. An electricity market is a system to affect the purchase and sale of electricity using supply and demand to set the price as discussed below: Reducing the price paid by consumers for electricity is invariably the first reason given for introducing competitive electricity markets. Microgrid operates in a local market and usually cater to the customers of medium sizes (such as, commercial complex, small industries etc.) and residential. These customers do not have the financial incentives and the expertise required to contribute effectively in the price matter to such a complex local market. Possibly as a consequence of this lack of representation, most electricity markets do not treat consumers as a genuine demand side capable of making rational decisions, but simply as a load that needs to be served under all conditions.