Impact of Demand Response Participation in Energy, Reserve and Capacity Markets

Demand response is capable of providing multiple services, including energy and reserve. As a consequence of providing energy, demand response is also inherently contributing to generation adequacy, and thus may be in entitled to avail of revenue from a capacity remuneration mechanism. Participation in multiple markets may result in a trade-off, thus necessitating simultaneous optimization of the demand response provision of such services. This paper uses Mixed Complementarity Problems to investigate these trade-offs and resulting market outcomes in the presence of load-shifting demand response. An approach to approximate the capacity value of the demand response resource, thereby permitting its participation in the capacity market, is also presented. It is found that, for the case study examined here, that demand response has its most significant impact on the energy market, with marginal and negligible impacts on the capacity and reserve market, respectively. The results also suggest that considerable cost savings are attainable by the DR aggregator through participation in the energy market, but that significant further cost savings are not forthcoming through participation in the reserve or capacity market.