Benefits of a Demand Response Exchange Participating in Existing Bulk-Power Markets

Abstract

In most U.S. market sponsored demand response (DR) programs, revenue earned from energy markets has been relatively low compared to DR used for capacity markets and ancillary services. This paper presents an aggregated DR model participating in the bulk-power market as a service through a pool-based entity called demand response exchange (DRX). Using the DRX structure, DR providers can participate in energy markets as a service to benefit bulk-power market entities. The benefits and challenges to each market entity using DR-as-a-service are presented in an extended review. The DRX model in this study is a market entity that operates with the day-ahead market to select DR offers that minimize electric utility payments. A case study was performed using the proposed DRX model on the IEEE 24-bus system, augmented to represent actual bulk-power market prices to study factors that influence utility payments under the DRX-market paradigm. Two high-price days of the PJM market were simulated, and it was shown for a single day on the augmented test case that spending $69,955 for DR-as-a-service results in a reduction of utility payments of $864,199. The day-ahead generator supply curve, network congestion, and DR curtailment were found to be the most influencing factors that impact the benefit of using DR-as-a-service.