Analysis of conditions for the power transmission and distribution company to select high shares of variable renewable energy and minimize the total social cost of power supply

Abstract

Power supply system optimization, in which the installed capacity and power output from variable renewable energy (VRE) and thermal power are obtained by minimizing the total cost of power supply, provides conditions for lower-cost integration of high shares of VRE. However, power transmission and distribution (PTD) companies operate on a partially optimized system in which the installed power capacities are fixed and the amount of power acquired is primarily driven by the price of electricity from the various power sources. In this study, we analyze the effect of electricity pricing on the amount of power acquired by the PTD companies from the power supply sources using a power supply mix model. The model has an optimization objective function aimed at minimizing the cost of power acquired and the cost of operating the power transmission and storage facilities by the PTD companies. The power system of Hokkaido, Japan, is taken as the case study for this analysis. The results show that the electricity pricing can affect the amount of power purchased by the PTD company and increase or decrease the VRE share of a total system optimization scenario.