Framework for the incorporation of demand-side in a competitive electricity market

Abstract

The paper discusses the importance of simultaneous plant production and demand reduction scheduling which is required for the establishment of a full electricity market where demand-side has opportunity to compete with generators, as is the case with the England & Wales Pool's demand-side bidding (DSB) scheme. It also emphasises that demand cannot be generally treated as negative generation because of the ability of demand to redistribute itself in response to price based load management activities. In that sense, an adequate scheduling methodology of available resources (from supply and demand-sides) is needed to facilitate the new market. However, traditional formulations of the plant scheduling problem are not valid when load reduction is available, as gross demand is not known in advance. For that purpose a composite model for optimal generation and demand reduction scheduling is presented in the paper. It is shown that this model can be used for a comprehensive evaluation of possible scenarios for the implementation of demand-side bidding into the electricity market and the assessment of the influence of DSB on total production costs, system marginal price (SMP) profile, capacity element payments and benefit allocation between producers and consumers.