$2.66 Million Grant To Support New Risk Analysis System for Renewable Energy Market

With the support of a $2.66 million grant from the U.S. Department of Energy (DOE), a research team led by Aparna Gupta, an associate professor of quantitative finance in the Lally School of Management at Rensselaer Polytechnic Institute, will develop crucial risk management tools for the power sector to better incorporate renewable energy into the energy market in the coming decades.

Because of risks such as weather variability and a lack of power system storage, relying on wind and solar currently seems far riskier than traditional, less environmentally friendly energy sources to many end users. The risk segmenting and scoring methods that will be created over the course of this three-year grant will make it easier for renewable energy producers to actively participate in energy markets, and for end users to benefit from reliable, inexpensive energy.

“By borrowing concepts from finance to break the risks inherent in using solar and wind for power into segments, we will be able to establish mechanisms by which renewable generators can assess their risks, price their risks to participate in the market, and still realize value while ensuring the demands and needs of the users are met,” Gupta said.

This project underscores the value of the unique position of Lally as a business and management school situated within a technological university with centuries-long history of innovation, particularly in the fields of science and engineering.

“This interdisciplinary project exemplifies the New Polytechnic model that drives research and education at Lally and throughout Rensselaer,” said Chanaka Edirisinghe, the acting dean of Lally and a chaired professor of quantitative finance. “We are proud to be among the collaborators on this project, which Aparna is leading with a collaborative and visionary spirit.”

Gupta will be joined in this cross-disciplinary effort by several collaborators, including three experienced faculty from the Rensselaer School of Engineering: Joe Chow, an Institute Professor of electrical, computer, and systems engineering; Koushik Kar, a professor of electrical, computer, and systems engineering; and Kristen Schell, an assistant professor of industrial and systems engineering.

“Understanding the electricity market entails knowledge of both engineering and finance,” Chow said. “Rensselaer has a world-class power faculty with strong connections to industry and national laboratories, which are important in securing large collaborative projects. The project aims at designing new concepts and methods to improve the efficiency of energy in ways that could mean a savings of more than $100 million per year in New York.”

Additional collaborators hail from Sandia National Laboratories, North Carolina State University, and Underwriters Laboratories, a global leader in weather forecasting for renewable energy generation prediction. While the project received $2.66 million from the federal government, the true project value is $3.22 million with cost-share funding brought to the budget by Rensselaer and the other collaborators.

Rounding out the advisory members working with the Rensselaer team are New York Independent System Operator (NYISO), the Electric Reliability Council of Texas (ERCOT), and the Public Service Company of New Mexico (PNM). These organizations will advise the project using their end-user commercial energy network knowledge.

“The phenomenal team members we assembled, along with our ability and willingness to connect across the disciplinary range needed to address the risk management challenges underlying the power systems of the future, were pivotal for securing this grant,” Gupta said. “The rich ecosystem at Rensselaer will allow the entire team to spearhead groundbreaking research and build systems for the future.”

The grant is issued by DOE’s Advanced Research Projects Agency-Energy (ARPA-E) through their new Performance-based Energy Resource Feedback, Optimization, and Risk Management (PERFORM) program.