Optimal purchasing process for electricity and renewable energy credits with price and demand uncertainty

Abstract

This paper optimizes the electricity and renewable energy credit (REC) purchasing process for energy distribution. Electricity is traded in deregulated time-sequential markets at fluctuating prices. Optimal electricity purchasing under price and demand uncertainty is a challenging task for electricity distributors, and the recently implemented renewable portfolio standards (RPS) further complicate the purchasing process. Government regulatory decisions concerning the RPS require distributors to purchase corresponding certificates, namely RECs, equivalent to a certain percentage of their electricity sales. This paper formulates and optimizes the joint purchasing process for electricity and RECs. It also analyzes the effect of RPS policy on electricity distributors.

Keywords

Renewable energy credit / information update / dynamic programming

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