Demand Response of an Industrial Buyer considering Congestion and LMP in Day-Ahead Electricity Market

Abstract

Abstract This paper proposes a methodology for developing Price Responsive Demand Shifting (PRDS) based bidding strategy of an industrial buyer, who can reschedule its production plan, considering power system network constraints. Locational Marginal Price (LMP) methodology, which is being used in PJM, California, New York, and New England electricity markets, has been utilized to manage the congestion. In this work, a stochastic linear optimization formulation comprising of two sub-problems has been proposed to obtain the optimal bidding strategy of an industrial buyer considering PRDS bidding. The first sub-problem is formulated as to maximize the social welfare of market participants subject to operational constraints and security constraints to facilitate market clearing process, while the second sub-problem represents the industrial buyer’s purchase cost saving maximization. The PRDS based bidding strategy, which is able to shift the demand, from high price periods to low price periods, has been obtained by solving two subproblems. The effectiveness of the proposed method has been tested on a 5-bus system and modified IEEE 30-bus system considering the hourly day-ahead market. Results obtained with the PRDS based bidding strategy have been compared with those obtained with a Conventional Price-Quantity (CPQ) bid. In simulation studies, it is observed that the PRDS approach can control the LMPs and congestion at the system buses. It is also found that PRDS can mitigate the market power by flattening the demand, which led to more saving and satisfying demand.