Towards Full Integration of Demand-Side Resources in Joint Forward Energy/Reserve Electricity Markets

This paper proposes a security-constrained forward market clearing algorithm within which the inherent characteristics of demand flexibility are acknowledged when the provision of reserve from the demand side is considered. In the proposed formulation, we co-optimize the cost of scheduling the appropriate resources to guarantee the security of the system and the expected cost of operating under any credible system state. In addition, we consider that consumers can offer to provide spinning reserve capacity deployable by voluntary load reductions in response to contingencies. Due to the load recovery effect (i.e., since energy usage is essentially postponed when demand-side reserve is deployed), in post-contingency states, any voluntary reduction in the load has to be accompanied by a subsequent increase in demand from the initial forecast. We demonstrate that the marginal value of the reserve provided by the demand can only be calculated taking into account the cost of supplying the recovery consumption. Flexible consumers can reduce their payments on average if energy is settled through real-time prices.