Mitigating risk of random resources within a two-settlement electricity market

Based on a two-settlement electricity market model built within a stochastic programming framework, this paper proposes a market-clearing mechanism that allows flexible random participants - such as variable renewable energy resources and price-sensitive load-serving entities - to mitigate their risks of facing economic losses in the market. More precisely, the mechanism extends to flexible random participants the risk-mitigating capabilities that reserve capacity offers enable for firm generators (i.e., conventional generators). The proposed mechanism is based on the premise that flexible random participants should be remunerated for the partial control capabilities they may have over their resources in spite of their randomness.