Some Considerations in Respect to Customer-Centric Demand Response Market Design

For already of the past decade, the Georgia?s electricity sector has been engaged in a complex process to bring increased competition to the business of electric generation, sales, and service delivery. But initial legislative and regulatory efforts to promote competition have focused on the supply side of the market: creating trading floors for energy and capacity sales, removing barriers to independent generators and marketers, and promoting open and non-discriminatory access to the transmission grid. It is assumed by many that robust competition among a variety of suppliers would be sufficient to ensure reasonable electricity rates and service options to customers. But the principal lesson learned from New England?s, French, Germany, Austria and other power systems and markets is that competition among electricity suppliers alone (without an active demand response) is not enough to create efficiently competitive electricity markets. Demand response provides a fair reward to consumers for demand flexibility without compensation of suppliers and relies on available technical solutions. But customers benefit alone is not enough to make demand response to participate in balancing market. Suppliers could also gain by making use of demand response, if they chose to do so. Thus, the purpose of Our study is twofold: to show that robust competition among a variety of suppliers without an active demand response is not enough to create efficiently competitive electricity markets, and to test the hypothesis that ?Only under the fully liberalized customer-centric demand response electricity market with ?Aggregators? on place Georgia?s domestic customers can reap the benefits from their ?demand response? behavior in the form of reduced energy bills without the need of compensating suppliers?.In order to test our hypothesis, empirical analyses have been applied. Based exclusively on secondary data obtained from various sources, We have made the modification to the Georgian Electricity Market Model (GEMM2015) developed by Deloitte Consulting in collaboration with Pierce Atwood Attorneys LLC in 2012. Our considerations are based mainly on the cost-benefit analysis commissioned by Regulatory Assistance Project (RAP) aiming to prove that all customers benefit from explicit demand response, not just those customers who reduce their demand.Thus, instead of paying to generators that sell energy in the balancing market a ?market-clearing price? (in the event of ?over-scheduling?) or compensating generators to reduce generation (in the event of ?under-scheduling?), it would be more reasonable to deploy responsive demand for balancing purposes.