An assessment of the effects of demand response in electricity markets

In this paper, we present a method for assessing the impacts of demand-response (DR) programs on the load profile and the market prices, which can be recognized directly in terms of the demand elasticity (DE). The method simulates the effects of the DE arising from the DR programs on the liberalised wholesale electricity market. The influence of DR programs on the DE in the market is estimated, and then the impact of the DE on the load profile and the market prices is simulated using the day-ahead market-simulation tool by calculating a new market equilibrium point. The model is more suitable for initial planning stages of the DR programs and could be used to assess what levels of elasticity would be necessary to achieve the desired levels of DR and savings. The proposed method was illustrated on the centralized Slovenian electricity market. The results indicate that an increased DE leads to a lower demand for electricity, leading to significant reductions in the electricity price on the market. The method provides policy designers and investors in DR programs with a quick and effective way to estimate the market effects of these programs. Copyright (c) 2012 John Wiley & Sons, Ltd.