Integrated Demand Response for Microgrids With Incentive Compatible Bidding Mechanism

Abstract

Demand response (DR) is proven effective in reducing costs and increasing resilience for microgrids. In addition to fixed and un-adjustable public loads, loads that can participate in demand response are mainly divided into industrial, commercial, and residential loads. In many countries and regions, the electricity price and load baseline of these types of loads vary significantly. In addition, different types of users have different price sensitivity and methods of participation in DR. To address these issues, with the implementation of an incentive-compatible bidding mechanism, this study proposed an integration DR strategy for the microgrid. Autonomous quotations based on electricity valuation were permitted to avoid disputes in the contribution clearing step. In addition, market clearing price with trading priority was specifically adopted to ensure incentive compatibility. The fixed proportion model was also utilized to avoid the imbalance of DR sources in extreme cases. In the fixed proportion model, the loss of reference price makes the price anticipator speculate. Hence, Vickrey-Clarke-Groves (VCG) mechanism was implemented to mitigate the impact of speculators. A numerical case with the price anticipator was applied to evaluate the performance of the proposed strategy. The result of the simulation demonstrated that the proposed DR mechanism effectively reduces the profit of the price anticipator, maximizes the social welfare of each component, and controls the overall cost in the budget.