A Cournot game analysis on market effects of queuing energy request as demand response

A key way for the power grid to withstand increasing demand electricity and a more diverse and unpredictable mix of energy resources is to encourage demand side participation in the electricity market. Recent rulings by the Federal Energy Regulatory Commission (FERC) favor not only the inclusion of but also the compensation for Demand Response (DR) aggregators in the wholesale electricity market. In this paper, we study the market effects of including Green Energy Management System (GEMS), a future Demand Response (DR) program that will take advantage of operational flexibility of certain types of loads to shape demand profile. Compared to other more classical DR methods, GEMS use a new architecture that allows them to build reserves of load requests associated to specific end-uses, e.g., Electrical Vehicle charging. The load can be dispatched (by turning on appliances) to follow a desired profile, called “load modification”, when compared to the unscheduled load profile. To study the market effect of GEMS, we adopt a Cournot game model that is widely used to study the behavior of traditional generators in the wholesale electricity market. The players in the game include traditional generators, the GEMS, and the Independent System Operator (ISO). We determine the optimization approach that must be taken by the GEMS to maximize its profits. We also determine the market equilibrium conditions that must exist among the players. Our numerical results indicate that the GEMS´ participation reduces the average market price of electricity.