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Portfolio and contract design for demand response resources

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  • Gärttner, Johannes
  • Flath, Christoph M.
  • Weinhardt, Christof

Abstract

Electricity generation from renewable energy sources has seen significant growth in recent years. To improve grid integration of these volatile energy resources, demand side flexibility can be operationalized through intelligent scheduling of flexible electrical loads. Prior research has mainly focused on determining dispatch schedules for exogenously given portfolios of flexible electricity demand. We expand on this literature by considering both contracting and dispatch of flexible loads. To this end, we formulate a demand aggregator’s problem of designing and dispatching a portfolio of supply (volatile renewable and conventional generators) and demand (inflexible base, shiftable and curtailable load) assets as a stochastic program. To account for different contracting regimes, we consider three market scenarios: (1) a liquid flexibility market where the energy retailer is a price-taker, (2) an opaque market where non-strategic customers will accept any individually rational contract offer and (3) a bi-level model with strategic customers optimally self-selecting into available contracts. In the last case, we also explore the effect of price discrimination versus uniform pricing. We evaluate these models using empirical load and generation data. Contrary to conventional wisdom, we find that flexibility contracting is not monotone-increasing in renewable generation capacities. Our research also suggests that curtailable load is a closer substitute to supply flexibility than shiftable load. Finally, we find that contracting of curtailing flexibility will be harder to implement if the aggregator has limited market power.

Suggested Citation

  • Gärttner, Johannes & Flath, Christoph M. & Weinhardt, Christof, 2018. "Portfolio and contract design for demand response resources," European Journal of Operational Research, Elsevier, vol. 266(1), pages 340-353.
    • Handle: RePEc:eee:ejores:v:266:y:2018:i:1:p:340-353
    DOI: 10.1016/j.ejor.2017.09.017
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    References listed on IDEAS

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    4. Dong Gu Choi & Michael K. Lim & Karthik Murali & Valerie M. Thomas, 2020. "Why Have Voluntary Time‐of‐Use Tariffs Fallen Short in the Residential Sector?," Production and Operations Management, Production and Operations Management Society, vol. 29(3), pages 617-642, March.
    5. Aliakbari Sani, Sajad & Bahn, Olivier & Delage, Erick, 2022. "Affine decision rule approximation to address demand response uncertainty in smart Grids’ capacity planning," European Journal of Operational Research, Elsevier, vol. 303(1), pages 438-455.
    6. Gao, Jianwei & Ma, Zeyang & Guo, Fengjia, 2019. "The influence of demand response on wind-integrated power system considering participation of the demand side," Energy, Elsevier, vol. 178(C), pages 723-738.
    7. Daeho Kim & Dong Gu Choi, 2023. "The aggregator’s contract design problem in the electricity demand response market," Operational Research, Springer, vol. 23(1), pages 1-47, March.
    8. Li, Longxi, 2021. "Coordination between smart distribution networks and multi-microgrids considering demand side management: A trilevel framework," Omega, Elsevier, vol. 102(C).
    9. Hasan M. Salman & Jagadeesh Pasupuleti & Ahmad H. Sabry, 2023. "Review on Causes of Power Outages and Their Occurrence: Mitigation Strategies," Sustainability, MDPI, vol. 15(20), pages 1-34, October.

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