IEEE TRANSACTIONS ON SMART GRID, VOL. 0, NO.

0, MONTH YEAR 1
A Multi-timescale Scheduling Approach for
Stochastic Reliability in Smart Grids with Wind
Generation and Opportunistic Demand
Miao He, Student Member, IEEE, Sugumar Murugesan, Member, IEEE, and Junshan Zhang, Fellow, IEEE
AbstractIn this study, we focus on the stochastic reliability of
smart grids with two classes of energy users - traditional energy
users and opportunistic energy users (e.g., smart appliances or
electric vehicles), and investigate the procurement of energy sup-
ply from both conventional generation (base-load and fast-start)
and wind generation via multi-timescale scheduling. Specically,
in day-ahead scheduling, with the distributional information
of wind generation and demand, we characterize the optimal
procurement of the energy supply from base-load generation and
the day-ahead price; in real-time scheduling, with the realizations
of wind generation and the demand of traditional energy users,
we optimize real-time price to manage opportunistic demand
so as to achieve system-wise reliability and efciency. More
specically, we consider two different models for opportunistic
energy users: non-persistent and persistent, and characterize
the optimal scheduling and pricing decisions for both models
by exploiting various computational and optimization tools.
Numerical results demonstrate that the proposed scheduling and
pricing schemes can effectively manage opportunistic demand
and enhance system reliability, thus have the potential to improve
the penetration of wind generation.
Index TermsReliability, wind generation, opportunistic en-
ergy user, real-time pricing, demand response, multi-timescale
scheduling, Markov decision process.
I. INTRODUCTION
A. Motivation
Wind energy is expected to constitute a signicant portion
of all renewable generation being integrated to the bulk power
grids of North America [1]. High penetration of wind genera-
tion not only brings many benets, economically and environ-
mentally, but also puts forth great operational challenges [2],
[3]. Unlike conventional energy resources, wind generation
is non-dispatchable, in the sense that wind energy can be
not harvested simply by request. Further, wind generation
exhibits greater variability across all timescales, which makes
it challenging for system operators to obtain the accurate
knowledge of future wind generation. Therefore, variable and
uncertain wind generation can have a signicant impact on the
Manuscript received January 13, 2012; revised July 31, 2012 and December
11, 2012; accepted December 27, 2012. This work was supported in part
by the US National Science Foundation under grant CPS-1035906, in part
by the DTRA grant HDTRA1-09-1-0032, and in part by the Power System
Engineering Research Center. Paper no. TSG-00499-2011.
The authors are with School of Electrical, Computer and Energy En-
gineering, Arizona State University, Tempe, AZ 85287, USA (e-mail:
Miao.He@asu.edu; Sugumar.Murugesan@asu.edu; Junshan.Zhang@asu.edu).
Color versions of one or more of the gures in this paper are available
online at http://ieeexplore.ieee.org.
Digital Object Identier 10.1109/TSG.2013.xxxxxxx
reliability of power systems, since the precise balance between
the energy supply and demand at all times is of paramount
signicance to the reliable operations of power systems.
Recently, a signicant amount of effort (e.g., [4][7]) has
been directed towards integrating wind generation into the
operations and planning of bulk power grids, in which wind
generation is usually treated as negative load, and auto-
regressive models (e.g., in [4]) or scenario trees (e.g., in [5],
[6]) are used to characterize the uncertainty of net load. To
cope with the uncertainty of net load, the approaches proposed
in [5][7] resort to operating reserve (the additional generation
capacities from on-line or fast-start generators) which is co-
scheduled with energy supply. However, as pointed out in
[1], the variability and uncertainty of demand is much less
signicant compared to that of wind generation, and hence, the
cost of operating reserve would increases signicantly when
the penetration level of wind generation is high.
With the objective to enhance the reliability of bulk power
grids and improve the efciency of wind generation integra-
tion, we observe that operating reserve can be obtained from
the demand response of an emerging class of energy users,
namely opportunistic energy users, instead of conventional
generation. It is noted in [8] that over 10% daily electricity
consumption in U.S. is from residential and small commercial
energy users such as water heater, cloth dryers, and dish
washers. Traditionally, these energy users pay a xed price per
unit of electricity that is established to represent an average
cost of power generation over a given time-frame (e.g., a
season). In smart grids with two-way communications, real-
time pricing programs can be implemented so that price is tied
with generation cost and can vary according to the availability
of energy supply. In this scenario, these energy users could be-
come smart by receiving and responding to real-time price, and
are branded as opportunistic energy users, with the following
behaviors distinct from traditional energy users: 1) they access
the energy market of smart grids in an opportunistic manner,
according to the availability of energy supply; 2) different from
the always-on demand of traditional energy users, the load
proles of opportunistic energy users can be bursty and can
be either inelastic or elastic; 3) the demand of opportunistic
energy users responds to price on a much ner timescale, and
thus can be used to tune the balance between energy supply
and demand in a real-time manner (i.e., within minutes). The
prevalence of the new class of opportunistic energy users,
if utilized intelligently, makes demand side management a
promising solution to reducing the cost incurred by high
2 IEEE TRANSACTIONS ON SMART GRID, VOL. 0, NO. 0, MONTH YEAR
penetration of wind generation.
B. Summary of Main Contributions and Organization
Aiming to tackle the challenge of integrating variable wind
generation into bulk power grids, we study multi-timescale
scheduling with two classes of energy users, namely traditional
energy users and opportunistic energy users, and address the
following challenges in maintaining the reliability of bulk
power grids: 1) the supply uncertainty as a result of variable
and non-stationary wind generation; 2) the demand uncertainty
due to a large number of opportunistic energy users and
their stochastic behavior; 3) the coupling between sequential
decisions across multiple timescales.
Building on the multi-timescale scheduling framework de-
veloped in our initial work [9], [10] and utilizing rened
system models, we rigorously characterize the solution to
the multi-timescale scheduling problem, and provide useful
insight into the impact of opportunistic demand on system
reliability. Motivated by the fact revealed in recent studies [11],
[12] that energy users can respond to high price by energy
conservation or by load shifting, we consider two types of
opportunistic energy users: non-persistent and persistent. Non-
persistent energy users leave the system when the current real-
time price is unacceptable, whereas persistent opportunistic
energy users wait for the next acceptable real-time price. We
obtain closed-form solution to the multi-timescale scheduling
problem when opportunistic energy users are non-persistent.
For the persistent case, the scheduling problem is formulated
as a multi-timescale Markov decision process (MMDP) which
we recast, explicitly, as a standard Markov decision process
(MDP) that can be solved using state-of-the-art techniques.
Further, we demonstrate via extensive numerical experiments
that when opportunistic demand is elastic, the proposed
scheduling and pricing schemes can effectively manage the
demand of opportunistic energy users and enhance the system
reliability, and thus has the potential to improve the penetration
of wind generation into smart grids.
The rest of the paper is organized as follows. In Section II,
we describe the multi-timescale scheduling framework and
provide the problem formulation. We study multi-timescale
scheduling for the non-persistent case in Section III. In Sec-
tion IV, we consider persistent opportunistic energy users and
formulate the scheduling problem as a multi-timescale Markov
decision process. Numerical results are presented in Section V.
We provide concluding remarks and identify directions for
future research in Section VI.
II. A MULTI-TIMESCALE SCHEDULING FRAMEWORK
In this paper, we study multi-timescale scheduling in a
framework as illustrated in Fig. 1. Specically, system operator
procures energy supply from conventional generation and wind
generation, and manage the demand of both classes of energy
users via day-ahead/real-time price to achieve system-wise
reliability. Conventional generation, in turn, is drawn from two
sources: base-load generators (e.g., thermal units) and fast-start
generators (e.g., gas turbines). Energy supply procurement and
end-user pricing are performed in two stages, i.e., day-ahead
Wind Generation
(uncertain energy supply)
Base-load Generation
Traditional Energy Users
Opportunistic Energy Users
(Non-persistent/Persistent)
(Multi-timescale
scheduling)
Fast-start Generation
day-ahead schedule
day-ahead retail prices
uncertain energy demand
real-time retail prices
real-time schedule uncertain energy demand
(a) Multi-timescale scheduling framework
1
T
2
T
2
T
1
T
Day-ahead scheduling with the distributional information of W and D at T1 scale
Real-time scheduling and balancing at T2 scale
(b) Scheduling horizon and timescales
Fig. 1. A multi-timescale scheduling framework with wind generation and
two classes of energy users
scheduling and real-time scheduling, at different timescales.
In day-ahead scheduling, with the distributional information
of wind generation W and traditional energy users demand
D
t
, system operator decides the energy supply procurement
s from base-load generators and day-ahead price u, for the
next day. In real-time scheduling, upon the realization of W
and D
t
, system operator decides the real-time price v for
opportunistic energy users, and dispatchs fast-start generation
or cancels part of scheduled base-load generation, as needed,
to close the gap between demand and supply. It is worth
noting that the above framework that consists of day-ahead
and real-time scheduling is developed based on the state-of-
the-art scheduling schemes of power systems (e.g. [2], [3],
[13]), by explicitly incorporating opportunistic energy users
and the heterogeneous demand response of two classes of
energy users.
A. Problem Formulation
As illustrated in Fig. 1(b), a 24-hour period is divided into
M T
1
-slots of equal length, and each T
1
-slot, in turn, consists
of K T
2
-slots
1
. The objective of system operator is to nd
a policy that dictates the multi-timescale decisions s, u
and v, so that the overall expected prot across the next day
is maximized
2
. A general formulation of the multi-timescale
scheduling problem is provided below:
P : max

m=1
R
u
m
(), (1)
where R
u
m
() is the total net prot in a T
1
-slot, given by
3
:
R
u
m
() =
K

k=1
E

l
k,m
R
l
k,m
(
l
k,m
, ), (2)
1
A T
1
-slot and a T
2
-slot can span an hour and 10 minutes, respectively.
2
Here, the scheduling problem is investigated from the perspective of an
(vertically integrated) utility which owns the wind generation asset. Accord-
ingly, wind generation is utilized as much as possible (with no curtailment).
3
The notation E
y
x
denotes the expectation over x conditioned on y.
HE, MURUGESAN AND ZHANG: A MULTI-TIMESCALE SCHEDULING APPROACH FOR STOCHASTIC RELIABILITY IN SMART GRIDS 3
where R
l
k,m
is the net prot in the kth T
2
-slot of the mth
T
1
-slot (henceforth called the (k, m)th slot), and
l
k,m
is the
system state in the (k, m)th slot that is observable in real
time
4
. When opportunistic energy users are non-persistent,
system state consists of wind generation and the demand from
traditional energy users, i.e.,
l
k,m
={W
k,m
,D
t
k,m
}. When
opportunistic energy users are persistent, system state is

l
k,m
={W
k,m
,D
t
k,m
,P
l
k,m
}, where P
l
k,m
denotes the number
of the persistent opportunistic energy users carried over from
the previous T
2
-slot to the (k, m)th slot.
B. Energy Supply and Demand Models
1) Stochastic wind generation: Wind generation forecasting
has been the focus of a signicant amount of research and
industrial effort; see [14] for a detailed discussion on the var-
ious wind generation forecasting methods of practical power
systems. One key insight revealed by the survey [14] is that the
efciency of wind generation integration would highly depend
on the accuracy of wind generation forecast. Therefore, fol-
lowing the modeling approach in [5], we directly characterize
the forecast error. Specically, given a point forecast

W
m
, the
amount of the wind generation in the (k, m)th slot in day-
ahead scheduling is given by
W
k,m
=

W
m
+
wm
, (3)
where forecast error
wm
is closely tied to forecasting tech-
niques, and hence can have arbitrary probability distribution
and can also be non-stationary across T
1
slots. Another obser-
vation from [14] is that the variance of
wm
can be quite large
(e.g., the mean absolute percentage error (MAPE) can be as
high as 20%) for existing forecasting techniques in practice.
2) Generation cost: To facilitate qualitative analysis, we
adopt a linear generation cost model derived from the literature
[3], [13]. Specically, base-load generation incurs a cost of
c
1
per unit when dispatched in real-time; fast-start generation
incurs a cost c
2
per unit when dispatched in real-time as non-
spinning reserves; base-load generation, scheduled day-ahead
but canceled in real-time, incur a cost of c
p
per unit. Typically,
c
2
>c
1
>c
p
. Further, we assume that wind generation is cost-
free and utilized without curtailment.
3) Uncertain demand of traditional energy users: Based on
[15], we model the demand of traditional energy users in the
(k, m)th slot as a random variable with mean depending on
day-ahead price u
m
, as follows:
D
t
k,m
=
tm
u
m
t
+
t
, (4)
where
t
is a zero-mean random variable that accounts for the
uncertainty of traditional energy users demand,
t
is the price
elasticity that characterizes the demand response of traditional
energy users to price, and
tm
is a normalizing constant.
The price elasticity of energy users (either traditional or
opportunistic), is dened in [15] as the ratio of the percentage
change of the expected demand to that of price, i.e., for the
4
The super-scripts u and l are used to distinguish between the upper-
level quantities in a T
1
-slot and the lower-level quantities in a T
2
-slot.
case of traditional energy users,

t
=
u
m
E[D
tm
]
dE[D
tm
]
du
m
. (5)
It is worth noting that price elasticity is typically negative.
4) Uncertain demand of opportunistic energy users: Under
real-time pricing, we assume that opportunistic energy users
have the following behaviors:
Opportunistic energy users arrive independently accord-
ing to a Poisson process with rate
o
, which is constant
within a T
1
-slot but can vary across the T
1
-slots;
In each T
2
-slot, an opportunistic energy user i in the
system decides to accept or reject the announced real-
time price v by comparing it with a price acceptance
level V
i
, which is randomly chosen and is i.i.d across
opportunistic energy users;
The expected demand of opportunistic energy users has
a price elasticity
o
, which is dened similarly as in (5);
Each active opportunistic energy user has a per-unit
power consumption E
o
.
5) Day-Ahead and Real-Time Pricing: We consider the
following multi-timescale end-user pricing model:
Traditional and opportunistic energy users have separate
contracts: traditional energy users pay day-ahead price,
and opportunistic energy users pay real-time price;
Traditional energy users are informed, one day ahead, of
the day-ahead price u for each T
1
-slot;
Opportunistic energy users receive the real-time price v
at the beginning of each T
2
-slot;
Both day-ahead price and real-time price have price cap
u
cap
and v
cap
, respectively. The price caps are motivated
by the study [16] and intended to protect energy users by
hedging against the risk under variable price.
C. Net Prot in a T
2
-slot
Given the amount of conventional energy supply procure-
ment s
m
and the day-ahead price u
m
settled for each T
2
-slot
of the mth T
1
-slot in day-ahead scheduling, together with the
realizations of wind generation W
k,m
and traditional energy
users demand D
t
k,m
, the net prot in the (k, m)th slot is
given by
R
l
k,m
(
l
k,m
, )
= u
m
D
t
k,m
+E

Do
k,m
[v
k,m
D
o
k,m
+ (c
p
s
m
)1
A
+ (c
p

k,m
c
1
(s
m

k,m
))1
B
+ (c
1
s
m
+c
2

k,m
)1
C
], (6)
where D
o
k,m
denotes the demand of opportunistic energy
users, and
k,m
=W
k,m
+s
m
(D
t
k,m
+D
o
k,m
) quanties the
gap between supply and demand. Indicator 1
A
corresponds
to the scenario when wind generation is sufcient to meet the
demand of both classes of energy users. Indicator 1
B
refers to
the scenario when wind generation is not sufcient but there
is energy supply surplus, which necessitates the cancelation
of part of scheduled base-load generation. Indicator 1
C
cor-
responds to the scenario when there is energy supply decit
4 IEEE TRANSACTIONS ON SMART GRID, VOL. 0, NO. 0, MONTH YEAR
and fast-start generation has to be dispatched. Formally, these
indicators are described as follows:
1
A
=
_
1 if W
k,m
D
t
k,m
+D
o
k,m
0 otherwise
1
B
=
_
1 if 1
A
= 0 and
k,m
0
0 otherwise
1
C
=
_
1 if
k,m
< 0
0 otherwise
(7)
III. MULTI-TIMESCALE SCHEDULING WITH
NON-PERSISTENT OPPORTUNISTIC ENERGY USERS
The tight coupling between scheduling decisions, in the
sense that the energy supply procurement and the price in
day-ahead scheduling have a signicant impact on real-time
price, and real-time pricing policy, in turn, affect the realized
net prot of day-ahead schedule, underscores the need for the
joint optimization of day-ahead and real-time schedules. To
this end, we take a bottom-up approach in solving the multi-
timescale scheduling problem. Specically, we rst solve the
real-time scheduling problem, conditioned on day-ahead deci-
sions. Then, we investigate the day-ahead scheduling problem
by taking into account real-time pricing policy.
A. Real-time Scheduling in Timescale T
2
Recall that non-persistent opportunistic energy users re-
sponse to high real-time price by leaving the system, thus
the total demand in a T
2
-slot only depends on the current
decisions. Then, it sufces to examine the scheduling problem
in a T
2
-slot, which is formulated as
5
:
P
RT
nonpst
: max
v
R
l
(
l
, s, u, v). (8)
The optimal solution to P
RT
nonpst
denes a real-time pricing
policy
s,u
:
l
v, a mapping from the system state to a real-
time price conditioned on the day-ahead decisions (s, u).
B. Day-ahead Scheduling in Timescale T
1
The day-ahead scheduling problem can be re-formulated by
taking into account the real-time pricing policy
s,u
. Further,
since W and D
t
are independent and identically distributed
across the T
2
-slots of the T
1
-slot, the day-ahead scheduling
problem can be optimized by simply considering the snapshot
problem in a specic T
2
-slot, given by:
P
DA
nonpst
: max
s,u
E
u

l
_
R
l
(
l
, s, u,
s,u
(
l
))

. (9)
C. Approximate Solution
It is easy to see that a closed-form expression of
s,u
in
terms of (s, u) is unattainable. This observation, along with the
convolved nature of the uncertainties involved, makes a direct
joint optimization of P
RT
nonpst
and P
DA
nonpst
challenging.
We therefore take an alternative approach and obtain an ap-
proximate solution to the multi-timescale scheduling problem.
5
In Section III, we drop the sufx (k, m) for notational simplicity.
In light of the characteristics of practical power systems, we
impose the following conditions.
Condition I: Wind generation is not sufcient to meet
the total demand in the system.
Condition II: The uncertainty in the demand of op-
portunistic energy users is signicantly less than the
uncertainty of wind generation.
Condition I is motivated by the Renewable Portfolio Stan-
dards of U.S. [17], in which most of the current state-by-state
projected penetration levels of renewable generation (wind
generation included) are below 30%. Under such a penetration
level, it is unlikely that wind generation is sufcient to meet
the overall demand. We then provide an explanation of Con-
dition II. Since opportunistic energy users arrive according
to a Poisson process with rate
o
, it follows that the number
of active opportunistic energy users that accept the current
price v, denoted as N
a
, is a Poisson random variable with
mean
o
T
2
P(V v). Further, it is clear that
o
T
2
is large,
and hence, N
a
can be approximated by a Gaussian random
variable. Note that the demand of opportunistic energy users
is given by D
o
=N
a
E
o
, and it follows from (5) that
P(V v)
o
v
o
, (10)
where
o
v
o
min
is a normalizing constant, and v
min
denotes
the highest price that is acceptable to all opportunistic energy
users. Therefore, the demand of opportunistic energy users has
a Gaussian distribution N(q
o
(v),
2
o
(v)), with
q
o
(v)
o
T
2

o
v
o
E
o
,

2
o
(v)
o
T
2

o
v
o
E
2
o
. (11)
Observe from (11) that the variance of the demand of oppor-
tunistic energy users is of the same order as its mean. Further,
wind generation and the demand of opportunistic energy users
are typically comparable regarding the mean, and it is observed
that the uncertainty of wind generation is so high that the
standard deviation is of the same order as its mean. Therefore,
we conclude that Condition II holds.
1) Approximate Solution to the Real-time Scheduling Prob-
lem: It is easy to verify that 1
A
= 0 holds under Condition I.
Then, by using (11), (6) reduces to

R
l
(
l
, s, u, v) = uD
t
c
1
s +c
2
Y + (v c
2
) q
o
(v)
(2)
1/2
c
o
(v) exp
_
y
2
/2
_
c (Y q
o
(v)) (1 Q(y)) , (12)
where Y s+WD
t
, y
Y qo(v)
o(v)
, cc
p
c
1
+c
2
, and Q() is
the tail probability of the standard normal distribution.
The demand of opportunistic energy users is said to be
relatively inelastic if 1
o
<0, i.e., the percentage change in
demand is greater than that of price; otherwise, it is relatively
elastic. Since price elasticity can have a signicant impact on
the demand of opportunistic energy users, we proceed to study
the real-time schedules for different cases of elasticity.
Proposition 3.1: Suppose Condition I and Condition II
hold. When the demand of non-persistent opportunistic energy
users is relatively inelastic, i.e., 1
o
<0, the real-time
pricing policy is given by

s,u
(
l
)=v
cap
.
HE, MURUGESAN AND ZHANG: A MULTI-TIMESCALE SCHEDULING APPROACH FOR STOCHASTIC RELIABILITY IN SMART GRIDS 5
Remarks: The proof is provided in Appendix A. Note that
the above result is intuitive, since, with opportunistic energy
users demand being relatively insensitive (inelastic) to real-
time price, system operator can maximize the prot by simply
announcing the highest possible price, v
cap
.
Proposition 3.2: Suppose Condition I and Condition II
hold. When the demand of non-persistent opportunistic energy
users is relatively elastic, i.e.,
o
<1, the real-time pricing
policy

s,u
is given by

s,u
(
l
) =
_

_
o(c1cp)
1+o
if Y q
o
(
o(c1cp)
1+o
)
oc2
1+o
if Y < q
o
(
oc2
1+o
)
q
1
o
(Y ) o.w.
(13)
Remarks: The proof is provided in Appendix B. Note that the
rst case, i.e., Y q
o
(
o(c1cp)
1+o
), refers to a case of supply
surplus, and the second case is tied with a case of supply
decit. Then, it is natural that the real-time price in the
rst case is lower so as to encourage the consumption of
opportunistic energy users, whereas it is higher in the second
case. Therefore, when opportunistic demand is elastic, the
above pricing scheme can effectively manage opportunistic
demand to close the gap between supply and demand.
2) Approximate Solution to the Day-ahead Scheduling
Problem: Having established a closed-form real-time pricing
policy for both the elastic and inelastic cases, a day-ahead
schedule can be obtained via a single-stage optimization:

P
DA
nonpst
: max
s,u
E
W
E
u
Dt
_
R
l
(
l
, s, u,

s,u
(
l
)
_
, (14)
where R
l
is given by (6) and the expectations depend on
the exact stochastic models assumed for wind generation and
traditional energy users demand.
Proposition 3.3: The optimal decision of

P
DA
nonpst
is
u

=
_
u
cap
if 1
t
< 0
t
1+t
c
1
if
t
< 1,
s

= arg max
s
_
(c
2
c
1
)s +E
v
W,D
[(v c
2
)D
o
c1
B
(s +W
t
u
t

t
D
o
)]} . (15)
Remarks: The proof is provided in Appendix C. Based on
the results in Proposition 3.1, it is easy to see that when
opportunistic demand is inelastic, the optimal procurement of
base-load generation is given by:
s

= q
o
(v
cap
) +
t
u
t

W +F
1
Z
(1 c
p
/c) , (16)
where F
1
Z
() denotes the inverse of the CDF of Z
t

w
.
One key observation from (16) is that the last term,
F
1
Z
(1c
p
/c) equals s

E
W,D
[DW], and thus can be
regarded as spinning reserve, i.e., the additional generation
beside those scheduled to satisfy the expected net demand
E
W,D
[DW]. Since F
1
Z
() is a non-decreasing function, it
is clearly that F
1
Z
(1 c
p
/c) becomes larger as c
p
decreases,
or as c
2
c
1
increases, or as the variance of Z increases. In
other words, more spinning reserve would be scheduled when
the spinning reserve cost is lower, or when the non-spinning
reserve cost is higher, or when the uncertainty in net demand is
higher. For the elastic case, s

can be solved using numerical

methods, and a similar conclusion on reserve can be drawn.
IV. MULTI-TIMESCALE SCHEDULING WITH PERSISTENT
OPPORTUNISTIC ENERGY USERS
We now study the multi-timescale scheduling problem when
opportunistic energy users are persistent. We assume that
opportunistic energy users are persistent across both T
2
-slots
and T
1
-slots, and would leave the system by the end of the
day. Due to the persistent nature of opportunistic energy users,
the scheduling decisions in both T
2
-slots and T
1
-slots affect
the system trajectory and hence the scheduling decisions in
future slots across both timescales. With this insight, we treat
the scheduling problem as a multi-timescale Markov decision
process [18]. It is clear from Fig. 1(b) that the MMDP in this
study has the following special characteristics:
the two timescales do not overlap, since the upper level
decisions (day-ahead) are not made in real-time;
the upper level decisions are made solely based on
the stochastic understanding of the lower level process,
without any direct observation of the effect they have on
the lower level system dynamics.
The above characteristics make the multi-timescale scheduling
problem, for the persistent case, uniquely challenging.
We now describe the problem in detail. In day-ahead
scheduling, system operator decides the energy supply pro-
curement s
m
and the price u
m
for the mth T
1
-slot in the
next day. We dene the system state
u
m
of the mth T
1
-
slot as
u
m
={

W
m
,P
u
m
}, where P
u
m
denotes the number of
the persistent opportunistic energy users carried over from the
(m1)th T
1
-slot. In real-time scheduling, system operator has
the knowledge of wind generation, the demand of traditional
energy users and the number of the persistent opportunistic en-
ergy users carried over from previous T
2
-slot. Thus, the system
state in the (k, m)th T
2
-slot, i.e.,
l
k,m
={W
k,m
,D
tk,m
,P
l
k,m
}
as dened in Section II A, is observable in real-time. Based
on this information, system operator decides a real-time price
v
k,m
for the (k, m)th T
2
-slot. Having explicitly dened the
system states for both timescales, we then introduce the
optimality equations. With

X
m
= [X
1,m
, , X
K,m
], we have
V
u
m
(
u
m
) = max
sm,um
_
E

Wm,

Dtm
_
max
vm
_
E

P
l
m
K

k=1
_
R
l
k,m
({
u
m
,
l
k,m
}, s
m
, u
m
, v
k,m
)

+ E
P
u
m+1
=P
l
K,m
V
u
m+1
(
u
m+1
)
_
__
(17)
As noted earlier, this is an MMDP over a nite horizon,
with s
m
, u
m
as the upper level decisions (timescale T
1
) and
v
k,m
as the lower level decision (timescale T
2
). To mitigate
the complexity of the MMDP problem, we then exploit the
structural properties of the multi-timescale scheduling problem
and recast it as a classic MDP.
Proposition 4.4: With appropriately dened immediate re-
ward R
u
m
and action space a
u
m
, the multi-timescale scheduling
problem can be recast as a classic MDP at the slower time-
scale, the Bellman equation of which is given by:
V
u
m
(
u
m
) = max
a
u
m
={sm,um,m}
_
R
u
m
(
u
m
, a
u
m
)
6 IEEE TRANSACTIONS ON SMART GRID, VOL. 0, NO. 0, MONTH YEAR
+ E
{
u
m
,a
u
m
}
P
u
m+1
V
u
m+1
(
u
m+1
)
_
, (18)
where
m
:{W
k,m
,D
t
k,m
,P
l
k,m
}v
k,m
is a stationary mapping
within the mth T
1
-slot, and the various expectations used in
the MDP formulation are dened in (19).
E
{
u
m
,a
u
m
}
P
u
m+1
(.) = E
P
l
1,m
P
l
2,m
E
P
l
2,m
P
l
3,m
E
P
l
K1,m
P
l
K,m
E
P
l
K,m
P
u
m+1
(.)
E
P
l
k,m
P
l
k+1,m
(.) = E
W
k,m
E
Dt
k,m
E
N
k,m
E
{N
k,m
,P
l
k,m
}
P
l
k+1,m
(.)

v
k,m
= P(V v
k,m
)
E
{N
k,m
,P
l
k,m
}
P
l
k+1,m
(.) =
N
k,m
+P
l
k,m

P
l
k+1,m
=0
_
P
l
k,m
+N
k,m
P
l
k+1,m
_
(1
v
k,m
)
P
l
k+1,m
(
v
k,m
)
(N
k,m
+P
l
k,m
P
l
k+1,m
)
(.) (19)
A key step towards the above results is to view
m
as an
action taken in day-ahead scheduling. With this insight, we can
simplify the MMDP into a classic MDP, as discussed below.
Note that in (18), V
u
m
(
u
m
) is the expected net reward from
slot m until slot M in day-ahead scheduling, and the terminal
reward is given by
V
u
M
(
u
M
) = max
a
u
M
R
u
M
(
u
M
, a
u
M
). (20)
We now proceed to explicitly characterize the immediate
reward R
u
m
, for m{1, , M}:
R
u
m
(
u
m
, a
u
m
) = V
l
k,m
({

W
m
, P
l
k,m
}, a
u
m
)|
k=1
, (21)
where P
l
1,m
=P
u
m
by denition, and for k{1, ,K1}
V
l
k,m
({

W
m
, P
l
k,m
}, a
u
m
= {s
m
, u
m
,
m
})
= E

Wm
W
k,m
E
um
Dt
k,m
R
l
k,m
(
l
k,m
, a
u
m
)
+ E
P
l
k,m
P
l
k+1,m
V
l
k+1,m
({

W
m
, P
l
k+1,m
}, a
u
m
), (22)
and V
l
K,m
is given by
V
l
K,m
({

W
m
, P
l
K,m
}, a
u
m
)
= E

Wm
W
K,m
E
um
Dt
K,m
R
l
K,m
(
l
K,m
, a
u
m
). (23)
Note that R
l
k,m
and V
l
k,m
can be regarded as the immediate
reward and the net reward at the lower level MDP, respectively.
More specically, (6) can be re-formulated as
R
l
k,m
(
l
k,m
, a
u
m
)
= u
m
D
t
k,n
+E
N
k,m
E
{N
k,m
,P
l
k,m
,v
k,m
}
Na
k,m
[v
k,m
D
o
k,m
+ (c
p
s
m
)1
A
+ (
k,m
c
p
(s
m

k,m
)c
1
)1
B
+ (c
1
s
m
+c
2

k,m
)1
C
], (24)
where N
k,m
denotes the number of the opportunistic energy
users arriving at the (k, m)th slot, which is Poisson distributed.
Summarizing, we have rigorously formulated the multi-
timescale scheduling problem as an MMDP with special
characteristics, and shown that it can be recast explicitly
as an MDP with continuous state and action spaces. Using

3
m
W

3
m
W
m
w

( )
m
w
f
Fig. 2. PDF of wind generation forecast error in the mth T
1
-slot.
appropriate discretization techniques, we can reformulate it
as a classic MDP with discrete state and action space [19].
Then, the problem formulated in (18) can be efciently solved
by using adaptive critics designs (ACD) [20]. Indeed, ACD
constitutes an effective solution technique, as suggested in the
literature [21], for a variety of dynamic, stochastic control and
optimization problems (e.g., [22][25]) in smart grids.
V. NUMERICAL RESULTS
We now study, via numerical experiments, the performance
of the proposed approach in the multi-timescale schedul-
ing framework, through comparison with existing scheduling
schemes in a benchmark smart grid system where all the
energy users are assumed to exhibit traditional response to
the day-ahead price u with the same price elasticity
t
.
Therefore, the scheduling and pricing decisions ( s

, u

) of
the benchmark system can be easily obtained from (15) by
neglecting the opportunistic demand and real-time pricing, i.e.,
s

=
t
u
t

W+F
1
Z
(1c
p
/c) and u

=u

. The performance
metrics are the per unit generation cost, which is dened as the
ratio of total generation cost to the total demand served, and
system reliability metrics including loss of load probability
(LOLP) and expected energy not served (EENS).
In this numerical study, we focus only on the key parame-
ters and investigate their impact on the system performance,
including the penetration level of wind generation
w
, the
penetration level of opportunistic demand
o
and the uncer-
tainty of wind generation. Specically, as in literature, the
penetration level of wind generation
w
is dened as the
ratio of wind generation to the total energy supply over the
whole scheduling horizon. Similarly, the penetration level of
opportunistic demand
o
is dened as the ratio of opportunistic
demand to the total demand. Data for other system parameters
are described as follows.
A. Simulation Data
1) Stochastic Wind Generation: Wind generation data are
collected from [26] and scaled according to the penetration
level
w
. The point forecast

W
m
in (3) is provided using the
Markov chain developed in [26]. For simplicity, the probability
distribution illustrated in Fig. 2 is used for
w
. It is easy to
see that is exactly the MAPE. For day-ahead forecast, is
usually around 20% [14].
2) Generation Cost: We adopt the approach in [27], which
utilizes the heat rates of generators to compute the genera-
tion cost. Here, base-load generators of coal type and fast-
start generators of #2 oil type are considered. Specically,
c
1
=30.45$/MWh, c
2
=228.51$/MWh and c
p
=15$/MWh.
HE, MURUGESAN AND ZHANG: A MULTI-TIMESCALE SCHEDULING APPROACH FOR STOCHASTIC RELIABILITY IN SMART GRIDS 7
0 5% 10% 15% 20% 25% 30%
26
28
30
32
34
36
38
Penetration level of wind generation
P
e
r

u
n
i
t

g
e
n
e
r
a
t
i
o
n

c
o
s
t

(
$
/
M
W
h
)


Multitimescale scheduling (
o
=30%)
Multitimescale scheduling (
o
=10%)
Benchmark system
Fig. 3. Per unit generation cost ( = 20%).
0 5% 10% 15% 20% 25% 30%
150
250
350
450
550
650
Penetration level of wind generation
D
i
s
p
a
t
c
h
e
d

f
a
s
t

s
t
a
r
t

g
e
n
e
r
a
t
i
o
n

(
/
M
W
)


Multitimescale scheduling(=30%)
Multitimescale scheduling(=10%)
Benchmark system
Fig. 4. Dispatched fast-start generation ( = 20%).
3) Uncertain Demand: The hourly demand data in Table. 4
of [28] with peak value 8550 MW is used for both systems.
For given total hourly demand D, we set E[D
t
]=D for the
benchmark system; for the multi-timescale scheduling system,
traditional and opportunistic demand are properly scaled by
setting E[D
t
]=(1
o
)D and E[D
o
]=
o
D, respectively. For

t
, a zero-mean normal distribution with standard deviation

t
that is 3% of the expected demand E[D
tm
] is used by
truncating over (3
t
,3
t
). Further, we use
t
=0.5,
o
=2
and 0.05$/kWh as the price cap for both u and v.
B. Performance Evaluation and Discussion
We use the case of non-persistent opportunistic demand and
the hour with peak demand of 8550 MW as an illustrative
example. Note that the metrics are computed via Monte-
carlo simulations by choosing wind generation and demand
randomly according to their distributions specied earlier.
1) Per Unit Generation Cost: In Fig. 3, the per unit
generation cost is plotted against various
w
. In the multi-
timescale scheduling system, the per unit generation cost
decreases signicantly with
w
; in contrast, in the benchmark
system, the per unit generation cost is not really reduced.
The reason is revealed in Fig. 4, i.e., much more fast-start
generation is dispatched in the benchmark system.
2) Reliability: In practice, usually, a xed amount of active
reserve is scheduled. One practical rule is the X+Y rule
[29], in which active reserve is R=X%

D+Y %

W for given
0 5% 10% 15% 20% 25% 30%
0
5%
10%
L
O
L
P
0 5% 10% 15% 20% 25% 30%
100
300
500
700
Penetration level of wind generation
E
E
N
S

(
M
W
h
)


Multitimescale (
o
=30%) Multitimescale (
o
=10%) Benchmark system
Fig. 5. System Reliability ( = 20%).
10% 15% 20% 25% 30%
100
200
300
400
500
600
MAPE of wind generation forecast ()
F
a
s
t

s
t
a
r
t

g
e
n
e
r
a
t
i
o
n

(
M
W
)


Multitimescale scheduling (
o
=30%)
Multitimescale scheduling (
o
=10%)
Benchmark system
Fig. 6. Non-spinning reserve requirement (w = 20%).
forecasted demand

D and wind generation

W. As discussed
earlier, part of s

is scheduled as spinning reserve with

an amount of SR=s

E[DW]. Therefore, adhering to a

3+10 rule, we consider NS=RSR fast-start generation as
non-spinning reserve, and investigate the system reliability,
which is quantied by LOLP, i.e., E[1
{Ds

W>NS}
], and
EENS, i.e., T
1
E[(Ds

WNS)
+
]. It is observed from the
results illustrated in Fig. 5 that, for given penetration levels
of wind generation, the proposed multi-timescale scheduling
approach achieves higher reliability with the same reserve
requirement.
3) Impact of Forecast Accuracy: We control the uncertainty
of wind generation by varying , and investigate the impact
of forecast error on the fast-start generation that is necessary
to maintain the system reliability. It is observed in Fig. 6
that the fast-start generation requirement increases with in
all systems. For multi-timescale scheduling, this is because v
keeps xed and the opportunistic demand can not be reduced
any further in the supply decit case of Proposition 3.2.
Therefore, it is imperative to develop advanced models and
techniques to improve the forecast accuracy.
Summarizing, the above results suggest that the proposed
multi-timescale scheduling schemes have the potential to en-
hance the system reliability and improve the efciency of wind
generation integration. Note also that, the benet brought by
multi-timescale scheduling can be very limited if
o
is low,
e.g., when
o
10%, as observed in Fig. 3- Fig. 6.
8 IEEE TRANSACTIONS ON SMART GRID, VOL. 0, NO. 0, MONTH YEAR
VI. CONCLUSION
We study multi-timescale scheduling and pricing with tradi-
tional and opportunistic energy users to address the challenge
of integrating variable wind generation into smart grids. The
optimal scheduling and pricing decisions are characterized
rigorously for both the non-persistent case and the persistent
case. Through numerical experiments, we demonstrate the
potential benet of the proposed multi-timescale scheduling
approach, when compared with existing system and schemes.
In essence, upcoming smart grids are expected to be char-
acterized by the sophisticated temporal dynamics arising from
various factors such as the temporal correlation in wind power
output, the demand response from opportunistic energy users,
the ramp constraints of conventional generators, to name a
few. We believe that the studies we initiated here on multi-
timescale scheduling for integrating variable renewal energy
into smart grids, scratch only the tip of the iceberg. There are
still many questions remaining open to improve the penetration
of renewable energy into power grids, such as wind curtail-
ment and the impact on the penetration of wind generation
[30], more accurate forecasting techniques [31], the tradeoff
between interruptible load and reserves in wind generation
integration [32]; and our ongoing studies [31], [32] are along
this avenue.
ACKNOWLEDGMENT
The authors would like to thank the anonymous reviewers
for their valuable comments and suggestions to improve the
quality of the paper. They are also grateful to Dr. Lei Yang
for his insight and discussion.
VII. APPENDIX
A. Proof of Proposition 3.1
Usually the forecast error
t
and
w
usually have continu-
ous, symmetrical and unimodal probability distributions (e.g.,
Gaussian distribution used in [15]). Let
2
Y
denote the variance
of Y , then it follows from Condition II that
2
Y

2
o
. Then,
there exists a nite constant c
0
0 such that
P(|Y q
o
(v)| c
0

o
(v)) 1, (25)
and
6
Q(c
0
) 1, Q(c
0
) 0, exp(c
2
0
/2) 0. (26)
When Y q
o
(v) c
0

o
(v), (12) boils down to:

R
l
(
l
, s, u, v) = (v (c
1
c
p
)) q
o
(v) + (c
1
c
p
)Y
+ uD
t
c
1
s; (27)
When Y q
o
(v) c
0

o
(v), (12) simplies to

R
l
(
l
, s, u, v) = (v c
2
) q
o
(v) +uD
t
c
1
s +c
2
Y. (28)
It is clear that (27) and (28) are unimodal for v [v
min
, v
cap
],
both with peaks at v = v
cap
. This yields the real-time pricing
policy:

s,u
(
l
) = v
cap
.
6
It is well-known that (26) is valid for c
0
3.
B. Proof of Proposition 3.2
When the demand of non-persistent opportunistic energy
users is relatively elastic, i.e.,
o
<1,
o
(v) can be expected
to be much smaller than that in the inelastic case under
the same real-time price. With this insight, we resort to the
certainty equivalence techniques [33]. By approximating D
o
by its mean q
o
(v), the net prot is given by:

R
l
(
l
, s, u, v) = uD
t
c
1
s +c
2
Y + (v c
2
) q
o
(v)
c(Y q
o
(v))
+
. (29)
Clearly, (29) is a piece-wise polynomial in v. Thus, the optimal
v can be easily obtained, as summarized in Proposition 3.2.
C. Proof of Proposition 3.3
For convenience, dene s

= s E
u
Dt
[D
t
]. Since Y = s

+
W
t
, it is clear from Proposition 3.1 and Proposition 3.2 that
the real-time pricing policy depends on the day-ahead decision
only through s

. We represent this policy as

s
: (W,
t
) v.
With this insight, by using the change of variable technique,
the objective function of

P
DA
nonpst
can be rewritten as
E
W
E
u
Dt
_
R
l
(
l
, s

, u,

s
(W,
t
))
_
= f
1
(u) +f
2
(s

) +c
2
E
W
[W], (30)
where
f
1
(u)
t
(u c
1
)u
t
, (31)
f
2
(s

) E
W,t
E

s
(W,t)
Do
_
(

s
(W,
t
) c
2
)D
o
c1
B
(s

t
D
o
+W)

+(c
2
c
1
)s

. (32)
Let F = {(u, s

); u 0, s

t
u
t
} denote the solution
space for the objective function of

P
DA
nonpst
dened in (30).
Then, it can be veried that u

dened in the proposition

statement maximizes f
1
(u). Dene s

0
=
t
u
t
, and let
s

maximize f
2
(s

). If we show that (u

, s

) belongs to
the solution space F, then (u

, s

) optimizes the day-ahead

scheduling problem in (30).
Since u

0, it is now sufcient to show that s

0
. A
sufcient condition to establish this is given by
f
2
(s

) f
2
(s

0
), s

0
. (33)
Under Condition I, wind generation is not sufcient to meet
the total demand when day-ahead price is u

, thus:
W < (s

0
+
t
) +D
o
. (34)
Therefore,
W +s

<
t
+D
o
, s

0
. (35)
It follows that 1) W + s < D
t
+ D
o
, i.e., there is no
scheduled supply surplus, thus 1
B
= 0 in (30); 2) Using the
preceding statement, recalling the denition of Y , we see that
Y < q
o
(
oc2
1+o
). Thus, from Proposition 3.2, the optimal real-
time price

s
(W,
t
) turns out to be a constant
oc2
1+o
, i.e.,
independent of the system state and the day-ahead decisions,
when the demand of opportunistic energy users is relatively
elastic. Also, for the relatively inelastic case, we know from
HE, MURUGESAN AND ZHANG: A MULTI-TIMESCALE SCHEDULING APPROACH FOR STOCHASTIC RELIABILITY IN SMART GRIDS 9
Proposition 3.1 that the optimal real-time price is a constant
v
cap
. Letting v
0
denote this constant real-time price for both
the elastic and inelastic cases, respectively, we have
f
2
(s

) = (c
2
c
1
)s

+ (v
0
c
2
)q
o
(v
0
), s

0
. (36)
Therefore, f
2
(s

) f
2
(s

0
), s

0
, and (u

, s

) indeed
lies in the feasible region F and hence optimizes the day-ahead
scheduling problem in (30). The optimal day-ahead decision,
s

, can now be computed using s

and u

.
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Miao He (S08) received the B.S. degree from Nanjing University of Posts and
Telecommunications, in 2005, and the M.S. degree from Tsinghua University,
in 2008. He is currently pursuing the Ph.D. degree at Arizona State University.
Sugumar Murugesan (S10-M11) received the B.E. degree from the College
of Engineering, Anna University, India in 2004 and the M.S. and Ph.D. degrees
from The Ohio State University, USA, in 2006 and 2010, respectively.
Junshan Zhang (F12) received his Ph.D. degree
from the School of ECE at Purdue University in
2000. He joined the EE Department at Arizona
State University in August 2000, where he has been
Professor since 2010. His research interests include
communications networks, cyber-physical systems
with applications to smart grid, stochastic modeling
and analysis, and wireless communications. His cur-
rent research focuses on fundamental problems in in-
formation networks and network science, including
network optimization/control, smart grid, cognitive
radio, and network information theory.
Prof. Zhang is a fellow of the IEEE, and a recipient of the ONR Young
Investigator Award in 2005 and the NSF CAREER award in 2003. He received
the Outstanding Research Award from the IEEE Phoenix Section in 2003.
He served as TPC co-chair for WICON 2008 and IPCCC06, TPC vice
chair for ICCCN06, and a member of the technical program committees of
INFOCOM, SECON, GLOBECOM, ICC, MOBIHOC, BROADNETS, and
SPIE ITCOM. He was the general chair for IEEE Communication Theory
Workshop 2007. He was an Associate Editor for IEEE Transactions on
Wireless Communications, and an editor for the Computer Network journal
and IEEE Wireless Communication Magazine. He co-authored a paper that
won IEEE ICC 2008 best paper award, and one of his papers was selected as
the INFOCOM 2009 Best Paper Award Runner-up. He is TPC co-chair for
INFOCOM 2012.