Value of Demand Response in the Smart Grid
paper ID: 52
Abstract
In this paper, we raise the question: What is value that DRM can bring to gencos and consumers in the smart grid? The question is fundamental for understanding the efficiency and impact of DRM on the smart grid. To answer this question, we first establish a theoretical framework that captures the bi-directional response between the gencos and consumers, and then compare the solutions obtained for the future smart grid with DRM with the classical solution for the current power grid without DRM. We adopt a hierarchical system model, where the power market is hierarchically decomposed into multiple processes, with consumers at the last level. Built on the system model, we use a Stackelberg game framework to capture the rational demand response behaviors of the consumers and the strategic planning of the gencos. We define the value of demand response based on the Stackelberg equilibrium solution and the standard optimal solution to economic dispatch problem. We use stylized examples to illustrate and compare the solutions and show the value of DRM.
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