Opportunity cost analysis of renewable energy participation in AGC frequency regulation

As the penetration of renewable energy sources (RESs) in the grid increases, the requirements for Automatic Generation Control (AGC) frequency regulation and reserve services should also be adjusted. RESs have great potential to provide auxiliary services, however, RESs also face the problem of revenue trade-off between participation in the electricity energy market and the auxiliary frequency regulation service market. Opportunity cost can help decision-makers make a reasonable allocation of resources and maximize the theoretical benefits. In this context, an opportunity cost calculation model for RESs in delivering AGC service is provided in this paper. The calculation process of the opportunity cost for RESs to provide AGC auxiliary services is proposed in this paper. To analysis the opportunity cost of the RES plants providing frequency adjustment service, the modified IEEE 6-bus system with two thermal power plants, two wind power plants, and one photovoltaic power plant, is adopted in this paper. Firstly, the clearing results of the electric market in the system is adopted. Then, the opportunity cost of the RESs with AGC is calculated. Finally, by comparing the opportunity cost per unit of capacity of frequency adjustment service and the AGC compensation price in the North Grid of China and the Northwest Grid of China, the optimal decision of AGC participation factor $a$ can be obtained. Case studies reveal that the marginal opportunity cost of AGC capacity for RESs increase with the growth of the AGC capacity. As a result, total revenue of the RESs reaches the maximum value at an appropriate ratio of AGC capacity, and this ratio is the optimal decision.