Effects of demand response on retail and wholesale power markets

Demand response has grown to be a part of the repertoire of resources used by utilities to manage the balance between generation and load. In recent years, advances in communications and control technology have enabled utilities to consider continuously controlling demand response to meet generation, rather than the other way around. This paper discusses the economic applications of a general method for load resource analysis that parallels the approach used to analyze generation resources and uses the method to examine the results of the US Department of Energy´s Olympic Peninsula Demonstration Testbed. A market-based closed-loop system of controllable assets is discussed with necessary and sufficient conditions on system controllability, observability and stability derived.