A Multilevel Model of Energy Market Considering Coupon Incentive Based Demand Response with Wind Power Uncertainty

Abstract

Demand response (DR) can decrease or increase energy consumption and has the ability to use generating assets more efficiently. Because of the increased power consumption, it has become necessary for the power system networks either to update or upgrade the already existing power system or to inculcate some schemes to minimize the load through effective customer engagement. To address this issue incentive-based demand response proved to be an effective tool to change the pattern of consumption. This work proposes a novel multilevel energy market considering coupon incentive based DR (C-IBDR). The proposed model is operated on a modified PJM 5-Bus system where the independent service operator (ISO) using economic dispatch (ED) computes the localized marginal pricing (LMP) and the load serving entity (LSE) issues coupons to consumers and procures the demand reduction from them. Two wind generators are incorporated into the test system and their effect on the localized marginal pricing with and without demand response is analyzed. The optimization problems are modeled using particle swarm optimization (PSO) and linear programming (LP) in MATLAB. The results demonstrate that the proposed C-IBDR reduces peak demand from 900 to 860 MW through the utilization of wind and DR. This alteration modifies the load curve, increases the power factor from 0.524 to 0.555, raises the revenue of LSEs from $106,646 to $106,946, reduces generation costs from $473,291 to $214,651, and procures a total of 262 MW of demand from the consumer side in the form of demand reduction. The system is further tested for scalability. The practicality of the suggested approach in handling more extensive systems is vividly demonstrated through its application to the modified IEEE 118-bus system.