An Options-based Market Model for an Isolated Microgrid with Battery Storage

Over the last decade, electric power systems have been undergoing a fundamental transition due to integration of distributed energy resources (DERs) and flexible loads at the consumer end. Traditionally inactive consumers are now playing the role of prosumers through active participation in electricity markets. However, due to intermittent generation penalties and power curtailment, the benefits provided to prosumers are marginal. This paper proposes a novel options-based market model for active participation of prosumers and consumers in future grids. The proposed market model is applied to an isolated microgrid with battery storage to show how prosumers and consumers can effectively trade energy among themselves under generation and load intermittencies. Through options contract, the consumers and prosumers in the microgrid can effectively transfer their risk of intermittency to the battery storage without facing any penalties. To elucidate the application of the proposed market model, a preliminary simulation framework is provided along with recommendations for future work.