Photovoltaic sizing assessment for microgrid communities under load shifting constraints and endogenous electricity prices: A Stackelberg approach

Abstract

Renewable energy resources are crucial for decarbonizing the energy sector. Distributed energy resources, such as renewable generation by microgrids, aid the transition to net-zero systems. As microgrids proliferate, renewable generation often exceeds self-supply capacities, necessitating either the sale of excess electricity or the implementation of demand-response strategies. The optimal approach for microgrids (selling or shifting demand) hinges on electricity prices. This article examines the interplay between microgrids, demand response, photovoltaic investments, and pricing mechanisms. A novel Stackelberg model is proposed to minimize microgrid investment and operational costs. The upper-level problem determines energy community investments and demand response levels based on electricity prices, while the lower-level problem addresses market dispatch and endogenous pricing for microgrids. Case studies with varying battery storage levels, demand response limits, and pricing mechanisms are conducted. The research results illustrate the responsiveness of market transactions to supply conditions and pricing. Key findings show that microgrid flexibility in demand response reduces grid dependency, prompting significant investments in solar energy and battery storage, driven by economic incentives, especially under spot market conditions. Investments in solar energy more than double when microgrids trade energy at spot prices compared to flat prices.