Abstract
In this paper, DR programs are integrated with the unit commitment economic dispatch model for a single day to lower total operating costs for an insular microgrid. The proposed model takes into account the forecasting errors associated with wind, solar, and load demands. A new combined DR program is presented to enhance microgrid operation and financial effectiveness, benefiting microgrid consumers. The price elasticity and consumer profit are the foundation for DR modeling. The optimization problem is developed as mixed‐integer nonlinear programming (MINLP) and solved using GAMS software. For the case study, an insular microgrid consisting of two microturbines, a wind turbine, solar photovoltaic, and battery storage is considered. Optimization is carried out under both with and without the DR program. The outcomes show that by implementing TOU and DLC DR programs, the operating cost is reduced by 13.55% and 9.68%, respectively. While consumers experience a financial loss in TOU‐DR, they earn profit in DLC‐DR. Therefore, a combination of the two, i.e., TOU + DLC DR, is proposed, reducing operating costs by 10.73% while increasing profit for users. The suggested approach benefits the microgrid operator as well as its users, encouraging the construction and operation of insular microgrids in rural or isolated areas.