Flexibility Auctions: A Framework for Managing Imbalance Risk

Abstract

As the electricity generated by variable resources grows, system operators and variable resources have to manage challenging imbalances between forward and real-time markets. The Flexibility Auction is a novel approach for managing imbalances as it will allow resources with imbalance risk to hedge their production by buying flexibility options. The flexibility options are offered by grid-connected resources that can provide physical flexibility. This presentation will focus on the design of the Flexibility Auction, its properties, and how it can complement system-level services such as CAISO's proposed imbalance reserves. The presentation will include simple examples to illustrate the impact of the Flexibility Auction on the market participants and the system's imbalance risk.