Price Responsive Demand Management of an Industrial Buyer in Day-ahead Electricity Market

Abstract

Abstract An industrial buyer, who can reschedule its production plan, may develop strategic bid by shifting its demand from high price period to low price period. Based on this concept, a new optimization formulation has been proposed to develop bidding strategy of such buyers considering Price Responsive Demand Shifting (PRDS). Since the bidding strategy of the buyer depends upon the market clearing price, which is volatile/uncertain due to various factors like gaming behavior of participants, demand forecasting error, transmission congestion etc, the proposed optimization problem is formulated as a stochastic linear problem, comprising of two sub-problems. The first sub-problem represents the market clearing process by the System Operator, which is formulated to maximize the social welfare of the market participants, while the second sub-problem aims at maximizing the purchase cost saving of the industrial buyer. The optimal bidding strategy has been obtained by solving these two sub-problems considering hourly market clearing for 24-hour scheduling period. The effectiveness of the proposed method has been tested on a 5-bus system and modified IEEE 30-bus system. Results obtained with the demand shifting based bidding strategy have been compared with those obtained with a Conventional Price Quantity (CPQ) bid strategy. It has been observed that the proposed approach leads to enhancement in the purchase cost saving as compared to the CPQ and meets the energy consumption targets of the industrial buyer.