Towards the Interactive Effects of Demand Response Participation on Electricity Spot Market Price

TL;DR

This study investigates how demand response programs can mitigate price spikes in electricity spot markets by modeling customer reactions and analyzing real market data, demonstrating significant smoothing of prices and cost reductions.

Contribution

It introduces a demand-price elasticity based model combined with regression analysis to evaluate demand response effects on market prices using real data.

Findings

Demand response reduces electricity price spikes.

DR programs significantly lower customer costs.

Price volatility is mitigated through demand-side management.

Abstract

The electricity market is threatened by supply scarcity, which may lead to very sharp price spikes in the spot market. On the other hand, demand-side's activities could effectively mitigate the supply scarcity and absorb most of these shocks and therefore smooth out the price volatility. In this paper, the positive effects of employing demand response programs on the spot market price are investigated. A demand-price elasticity based model is used to simulate the customer reaction function in the presence of a real time pricing. The demand achieve by DR program is used to adjust the spot market price by using a price regression model. SAS software is used to run the multiple linear regression model and MATLAB is used to simulate the demand response model. The approach is applied on one week data in summer 2014 of Connecticut in New England ISO. It could be concluded from the results of this study that applying DR program smooths out most of the price spikes in the electricity spot market and considerably reduces the customers' electricity cost.