In this paper we present a stochastic optimization problem for a strategic major consumer who has flexibility over its consumption and can offer reserve. Our model is a bi-level optimization model (reformulated as a mixed-integer program) that embeds the optimal power flow problem, in which electricity and reserve are co-optimized. We implement this model for a large consumer of electricity in the New Zealand Electricity Market (NZEM). To reduce the solution time of the large mixed integer program, we explore the specific properties of the optimal power flow to reformulate the model. We show that by adding further constraints to tighten the LP relaxation we manage to improve the performance of the model.
University of Auckland - Submitted March 2017