Integration of Interruptible Load Contracts in Supply Function Equilibrium Analysis for Electricity Markets

Abstract

As an effective measure of demand response programs, interruptible load management has been widely used in electricity markets. This paper addresses the problem of what impacts of interruptible load (IL) contracts will have on the equilibrium outcomes of electricity wholesale markets. First, a market demand model is developed to take considerations of IL contracts. Next, a linear supply function equilibrium model is presented for wholesale markets with IL contracts. The introduction of IL contracts leads to a non-smooth equilibrium problem. To solve this equilibrium problem, a novel solution method is proposed. Finally, numerical examples are presented to verify the effectiveness of the method, in which the uncertainty in market demand is considered to further reflect IL contracts' flexibility. It is shown that with IL contracts, market price and its fluctuation can be lowered. This effect is more obvious when the uncertainty in market demand is relatively large. Furthermore, to achieve the target of lowering market price and its fluctuation, the interruption threshold prices in the IL contracts should be determined carefully.