Abstract
We explore the value of demand response (DR) for enhancing wind power integration. This value is derived through load curtailment to manage the variability of wind power. It increases the opportunity to use wind power and brings economic benefits to the aggregation of the load serving entity (LSE) and the flexible energy consumer. DR is provided by the flexible load through call options offers to the LSE. A transaction mechanism is designed to incentivize the DR aggregator by an appropriate selection of the strike price. It is shown that the strike price should be chosen to be the true value of lost load. A multi-stage decision-theoretic formulation is presented to model the interaction between the aggregator and two settlement markets. Simulations reveal that the proposed approach reduces the total costs incurred by the LSE.
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