Financial Incentives for Energy Resource Investments in Stochastic Economic Dispatch

The stochastic economic dispatch (SED) provides a promising solution for short-term cost-efficiency with high renewable penetration. However, the long-term efficiency of SED, i.e., promoting efficient investments in both flexibility resources and renewable generations, has rarely been studied. We theoretically reveal the financial incentives for efficient investments in SED from both perspectives of the short-term and long-term performances: 1) We demonstrate the rationality behind the short-term failure of cost recovery or revenue adequacy, which provides proper signals to corresponding dispatchable generators, renewable generators, or system operator for long-term reconstruction and installation. 2) Through theoretical analysis of the statistical properties, we prove that the long-term expected profits of renewable and dispatchable generators provide appropriate signals to guide their future investments. In conclusion, the SED can indeed motivate the investments of flexibility resources and renewables to match up better with each other in the network, benefiting the system efficiency and reliability in the long run. Simulations are conducted for validation.