Equilibrium Analysis of Electricity Market With Demand Response Exchange to Counterbalance Bid Deviations of Renewable Generators

Abstract

Because of severe uncertainty and poor dispatchability of renewable energy, when renewable generators (RGs) bid in the day-ahead (DA) wholesale electricity market, how to tackle the deviations between their actual outputs and cleared quantities from the market is one of the important topics in the design of electricity markets with the RGs. In this paper, a demand response exchange (DRX) market is introduced to counterbalance the deviations, where both upward and downward DR resources are considered and the DRX market price is determined by the bids of DR customers. In addition, to examine impacts of the DRX market on strategic behaviors of participants in the DA market, a joint equilibrium model of the DA market and the DRX market is proposed. Specifically, in the DRX market, DR customers compete by submitting their bids in the form of supply functions when the RGs' total actual output is less than the cleared quantity from the DA market, while the demand function bid mode is applied for DR customers when the RGs' total actual output is greater than the cleared quantity from the DA market. Monte Carlo simulation and scenario reduction techniques are employed to deal with uncertainties of the actual output of RGs. Moreover, the equilibrium model is converted into a convex optimization problem for the solution, and the existence and uniqueness of Nash equilibrium for the DA market and DRX market are theoretically demonstrated. Due to information asymmetry in practice, a distributed algorithm is applied to find equilibrium outcomes. Finally, numerical examples are presented to verify the reasonableness and effectiveness of the proposed model and algorithms.