Incentive-based Demand Response Approach for Aggregated Demand Side Participation

This paper proposes a novel incentive-based demand response (DR) program that can be utilized by a service provider (SP) to procure capacity resources from its subscribed customers in terms of a load reduction. By providing incentives in advance, the SP can induce customers to participate in the program and voluntarily determine the quantity of load reduction to be sold to the SP. Stackelberg game theory is adopted to capture the interactions between the SP and its customers. The optimal incentives were determined analytically, and each customer's optimal load reduction was also decided accordingly. Simulation results showed that the proposed incentive-based DR approach is effective in determining optimal incentives for an SP to procure the required capacity resources.