Strategic Participation of Residential Thermal Demand Response in Energy and Capacity Markets

Abstract

The value proposition of residential thermal demand response (DR) could be enhanced through participation in multiple electricity markets. However, this potential value could be affected by misalignment of the strategic objectives of DR participants and also by the adoption levels of flexible heating technologies. This article presents an extended multi-perspective model (EMPM) which integrates the optimization problems of the DR participants within a single framework to evaluate the participation of residential thermal DR in energy and capacity markets. The capacity market participation is explicitly modeled based on parameters obtained using a bespoke capacity value assessment methodology. Subsequently, an iterative algorithm is proposed for determining consumer adoption levels of flexible heating technologies. The results indicate that while capacity market participation of residential thermal DR would be beneficial for all DR entities, consumers' comfort preferences would have a noticeable impact on the results. Additionally, very high consumer adoption levels of flexible technologies would reduce power system costs and increase investment in low-carbon generation, but would not be optimal from the consumers' investment perspective. Additionally, sensitivity analyses highlight that multiple market participation, energy inefficiency of the building fabric and greater preference for comfort could incentivize greater consumer adoption of flexible heating technologies.