Factoring the price elasticity of demand in the optimal power flow

In the traditional optimal power flow, demand sensitivity to price changes is assumed zero but in the new competitive environment, it is necessary to assume that demand is elastic and will vary as a function of price. In this paper, inclusion of price elasticity of demand into the optimal power flow is investigated. It analyzes the effect that the price responsive loads can have on the market operation. These loads can be modeled in the MATPOWER environment. The paper evaluates price elasticity effects on the consumers, generating companies, merchandising surplus, power system security and system operation cost. It shows that the consumers participation in the electricity market can reduce the electricity price that results in enhancing social welfare. These concepts are illustrated using a six-bus system, and numerical results obtained with the IEEE 14- bus system are used to verify the benefits of price responsive loads.