System and Market-Wide Impact Analysis of Coordinated Demand Response and Battery Storage Operation by a Load-Serving Entity

Abstract

Because of electricity markets, environmental concerns, transmission constraints, and variable renewable energy sources (VRES), coordinated operation of demand response (DR) and battery energy storage systems (BESS) has become critical. In turn, the optimal coordinated operation of DR and BESS by an entity can affect overall electricity market outcomes and transmission network conditions. The coordinated operation is desirable for the profit-seeking entity, but it may adversely affect the cost and revenues of other market participants or cause system congestion. Though few coordinated operation models already exist, our aim in this research is to provide a novel multi-objective optimization-based methodology for the coordinated operation of DR and BESS to boost market profit. Moreover, another goal is to simultaneously study the combined effects of such coordinated models on transmission networks and electricity markets for the first time. This paper has proposed a new method for coordinated DR and BESS utilization by a load-serving entity (LSE) to increase its profit. Moreover, it has employed agent-based modeling of the electricity systems (AMES) for testing our coordinated DR and BESS method under day-ahead market and transmission system conditions. Simulation results of case studies indicate that the operating costs of all LSEs decreased, and there was as much as 98,260 $/day in cost savings for BESS deploying LSE1. Although revenues of cheaper generation companies (GenCos) decreased, those of expensive GenCos increased or showed mixed trends. For example, GenCo 3 exhibits an 8765 $/day decrease in revenue for 25% BESS capacity, whereas a 6328 $/day increase in revenue for 37.5% BESS capacity. The variance of LMPs, widely used as a risk index, greatly decreased for the LSE utilizing the coordinated methodology, somewhat decreased for other LSEs but increased for cheaper GenCos with no LSE at the local node. Since BESS deployment decisions of an LSE can have system-wide or market-wide consequences, simulation analysis before deployment can help reduce market distortions or system congestions.