Energy-only markets with deferrable demand

In addition to its adverse impacts on power system operations, the large-scale integration of renewable energy sources presents market design challenges as it exacerbates the missing money problem by moving value from energy to capacity markets. Energy-only markets have been touted as a mechanism for alleviating the missing money problem, although demand response is widely recognized as the ultimate solution. In this paper we analyze the benefits of demand response and an energy-only market design on short-term operations and long-term investment, as well as the result of overlapping an energy-only market design in a market with active demand response. We use a multi-stage stochastic program to characterize the real-time and long-term market equilibrium, and a multi-stage stochastic unit commitment model followed by a real-time market to analyze the impact of operating reserve demand curves on day-ahead markets. Our model is applied on a case study of wind and demand response integration in Germany.