Measuring the potential value of demand response using historical market data

One of the main barriers to the deployment of Demand Response (DR) and Distributed Generation (DG) is the ex-ante assessment of their benefits. The aim of this study is to develop a general framework to evaluate this potential using day-ahead historical market data. We observe that profitability of DR-based strategies can be linked to several market characteristics. Among them are the price levels and the frequency of high levels of prices, the price differentials between consecutive hours and the frequency of high price spikes, the duration of peaks, the variables affecting prices (e.g. load, seasonality, weather, temperature, etc.). Although a single indicator to take into account all the above dimensions is not readily available, we propose to compare different markets in terms of ldquointeresting eventsrdquo referred to one or more of the above listed dimensions. The empirical analysis is based on five European markets, which present interesting differences in price patterns and are analyzed in order to give some insights on the different technologies and business models which may better exploit the potential of DR. This work shows a methodology which has to be refined in order to draw conclusions for specific sets of customers and technology combinations in order to understand the right price differentials and the possible DR time intervals.