Gaussian Residual Bidding Based Coalition for Two-Settlement Renewable Energy Market

To stabilize the output variability of renewable energy sources (RESs), distributed RESs can be aggregated and treated as any other conventional generators in the existing electricity markets. This paper proposes a coalitional framework to cope with the uncertainty of distributed RESs. We consider the case when RES owners participate in a two-settlement wholesale market, and a market operator financially penalizes the deviation of real-time generation from the day-ahead contract. Under the two-settlement market, we show that the grand coalition is stable and the core is non-empty so that there exists a revenue allocation vector that incentivizes the RES owners to stay in the grand coalition. Then, we propose a bidding strategy called Gaussian residual bidding (GRB) to maximize the coalition gain under different price-penalty ratio in the two-settlement process. We show that the GRB strategy makes the game a convex cooperative game. Thus the Shapley value lies within the core and can be used for fair revenue allocation. Our extensive simulations with real data demonstrate that the GRB strategy combined with the coalitional framework substantially increases both social welfare and individual revenue under various market scenarios compared to existing empirical quantile bidding and the forecast bidding strategies.