A novel approach for incorporating incentive-based and price-based demand response programs in long-term generation investment planning

Abstract

Today, power system planning requires simultaneous attention to supply and demand side management. It has gained remarkable attention due to the advent of new technological paradigms such as smart grid concepts and renewable energy resources. In this study, the effects of Demand Response (DR) as an emerging strategy of demand side management have been investigated on generation investment planning for achieving a technical, flexible, economical, and reliable solution for the supply side in the long-term. To this end, taking the advantage of system dynamics concepts and tools, the modeling of both principal DR types, i.e., price-based and incentive-based, is explored. In the first type, we formulate a novel market-based mutual relevance between market clearing price and willingness to pay of the price-based loads for accurately obtaining the electricity price as the primary signal for the investment process. The uncertain behavior of loads in these programs is expressed with a new concept called Certainty of Responsiveness (COR). A novel index, namely Loss of Load Duration Margin (LM), is proposed to incentivize the participants in incentive-based DR. Dispatching of these loads has been done using options contract. Numerical simulations are performed on a typical test supply system. Wind and solar photovoltaic units as the leading renewables in power systems are considered alongside the conventional thermal technologies. Different regulatory decisions about the adjustable parameters of DR programs are also analyzed. The results validate the effects of DR programs on total installed generation capacity, market prices, reliability indices, and outage costs in the long-term.