Strategic Spatial Load Shifting and Market Efficiency

TL;DR

This paper models how large flexible electricity consumers can strategically shift demand across locations, affecting market efficiency and system costs, with implications for generator profits and consumer costs.

Contribution

It introduces a Stackelberg game model for spatial load shifting, revealing potential misalignments with system cost minimization and analyzing strategic impacts on market outcomes.

Findings

Strategic load shifting can reduce system operating costs in most hours.

Misalignments occur at regime boundaries, causing redispatch and profit redistribution.

Flexible consumers can lower procurement costs despite some increases in total system costs.

Abstract

Large, spatially flexible electricity consumers such as data centers can reallocate demand across locations, influencing dispatch and prices in wholesale electricity markets. While flexible load is often assumed to improve system efficiency, this intuition typically relies on price-taking behavior. We study price-anticipatory spatial load shifting by modeling a large flexible consumer as a Stackelberg leader interacting with DC optimal power flow (DC-OPF) based market clearing. We show that decentralized, cost-minimizing load shifting need not align with system operating cost minimization, and that misalignment arises at boundaries between DC-OPF operating regimes, where small changes in load can induce discrete changes in marginal generators or congestion patterns. We evaluate strategic load shifting on the 73-bus RTS-GMLC test system, where findings indicate reductions in system operating cost in most hours, but misalignment in a subset of cases that are driven by redispatch at merit-order discontinuities. We find that these outcomes are primarily redistributive relative to a price-taking benchmark, reducing generator profits while lowering electricity procurement costs for both flexible and inflexible consumers, even in cases where total system operating costs increase.