Game-theoretic modeling of curtailment rules and network investments with distributed generation

Highlights: •Comparative study on curtailment rules and their effects on RES profitability. •Proposal of novel fair curtailment rule which minimises generators' disruption. •Modeling of private network upgrade as leader-follower (Stackelberg) game. •New model incorporating stochastic generation and variable demand. •New methodology for setting transmission charges in private network upgrade. -- Abstract: Renewable energy has achieved high penetration rates in many areas, leading to curtailment, especially if existing network infrastructure is insufficient and energy generated cannot be exported. In this context, Distribution Network Operators (DNOs) face a significant knowledge gap about how to implement curtailment rules that achieve desired operational objectives, but at the same time minimise disruption and economic losses for renewable generators. In this work, we study the properties of several curtailment rules widely used in UK renewable energy projects, and their effect on the viability of renewable generation investment. Moreover, we propose a new curtailment rule which guarantees fair allocation of curtailment amongst all generators with minimal disruption. Another key knowledge gap faced by DNOs is how to incentivise private network upgrades, especially in settings where several generators can use the same line against the payment of a transmission fee. In this work, we provide a solution to this problem by using tools from algorithmic game theory. Specifically, this setting can be modelled as a Stackelberg game between the private transmission line investor and local renewable generators, who are required to pay a transmission fee to access the line. We provide a method for computing the equilibrium of this game, using a model that captures the stochastic nature of renewable energy generation and demand. Finally, we use the practical setting of a grid reinforcement project from the UK and a large dataset of wind speed measurements and demand to validate our model. We show that charging a transmission fee as a proportion of the feed-in tariff price between 15% and 75% would allow both investors to implement their projects and achieve desirable distribution of the profit. Overall, our results show how using game-theoretic tools can help network operators to bridge the knowledge gap about setting the optimal curtailment rule and determining transmission charges for private network infrastructure.