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Allocating Variability and Reserve Requirements

UWIG FALL TECHNIICAL 

WORKSHOP

Brendan Kirby, 

Jack King, 

Michael Milligan

National Renewable Energy 

Laboratory Consultant

October 13, 2011

NREL/PR-5500-53294 Photo by NREL/PIX 19498
National Renewable Energy Laboratory Innovation for Our Energy Future

Aggregation Benefits (Old News)

• Net reduction in:

– Peak load

• Capacity requirement

– Contingency reserves

• Spin, Non, Supplemental

• Reserve sharing groups

– Variability

• Regulation

• Load following / ramping

– Uncertainty 

• Load forecast

• Wind & solar forecasts

– The amount of reduction depends on the correlation among individuals

• Increased utilization of responsive resources:

– Generation; 

– Responsive load;

– Shared across balancing areas (BAs).

 All of this is well established and (relatively) easy to calculate.
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Allocating Aggregation Benefits is More Difficult 

• No single mathematically “correct” allocation 

method:

– Many methods are not “fair”;

– At least two different methods are “fair”, depending on 

the desired results.

• Many methods have undesirable consequences 

that are not immediately obvious.

 Desired properties:

– Total allocated = Total required (easy); 

– Independent of subaggregations (hard);

– Independent of order BAs are added to system (hard).
National Renewable Energy Laboratory Innovation for Our Energy Future

Attractive Allocation Methods: Incremental

• B joins A;

• B holds A harmless and covers all the additional reserve 

requirements;

• Can be OK if you are deliberately favoring B:

– B brings jobs, tax advantages, environmental benefits, ...

• Gives the entire aggregation benefit to B:

– Example of A and B with identical reserve requirements 

(assuming uncorrelated requirements):

• A stand-alone reserve requirements = 100 MW;

• B stand-alone reserve requirements = 100 MW;

• Total stand-alone reserve requirements = 141 MW;

• A allocated reserve requirement = 100 MW (A held harmless); 

• B allocated reserve requirement = 41 MW (B supplying its full share).

– Clearly B is getting the better deal:

• Harder to see but just as true if A and B have different stand- alone requirements. 

• Things get more complex when C joins – order is 

important.
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Attractive Allocation Method: Proportional

• Simply ratio each component:

• Does get the correct total;

• Has different results if J & K combine to make B 

first vs. if reserves are allocated directly to J & K;

• Disproportionate allocation to small entities.
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Proportional Allocation Gives Different Answers for 

Different Sub-Aggregations

• Area B could be allocated 30, 26, or 25.

• Identical area K could be allocated 30, 42, or 

80.
National Renewable Energy Laboratory Innovation for Our Energy Future

Geometric Look at Variability & Reserves

• A & B variability adds statistically to T:

– Perfectly correlated: A & B are aligned;

– Perfectly uncorrelated: A & B at 90o. 

• Allocating based on correlation with T has desirable properties:

– Independent of sub-aggregations;

– Allocate to as many or as few individuals as desired;

– Independent of order: B first or last...;

– Produces a “fair” result.
National Renewable Energy Laboratory Innovation for Our Energy Future

ORNL’s Vector Allocation is Straightforward 

• Required data:

– Total system reserve requirement;

– Individual entity’s stand-alone reserve requirement;

– Total system reserve requirement without the 

individual.

( ) σ

σ σ σ

σ

i allocation

Total i Total i

Total

_ *

=

+ − −

2 2 2

2
National Renewable Energy Laboratory Innovation for Our Energy Future

ORNL Vector Allocation Method

• Allocation is independent of sub-aggregations.
National Renewable Energy Laboratory Innovation for Our Energy Future

Preliminary Regulation Allocation Results
National Renewable Energy Laboratory Innovation for Our Energy Future

Multiple Reserves

• Combine load, wind, and solar within each BA:

– Physical aggregation.

• Correlation may differ for each reserve;

• Allocation may differ for each reserve:

– Regulation;

– Spin;

– Non-spin.
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Conclusions 

• Aggregation provides benefits because individual 

requirements are not 100% correlated;

• Method needed to allocate reduced requirement 

among participants;

• Differences between allocation results are subtle: 

– Not immediately obvious which method is “better”;

– Many are numerically “correct”: they sum to the physical 

requirement;

– Many are not “fair”:

• Results depend on sub-aggregation and/or the order 

individuals are included.

• Vector allocation method is simple and fair.
Questions? 

13

Photo by Michael Milligan, 

NREL/PIX 13367