Auctions with explicit demand-side bidding in competitive electricity markets

This paper focuses on the development of a model for and the simulation of electricity auctions with demand-side bidding (DSB) explicitly considered. We generalize the competitive power pool (CPP) framework developed in [1] to include DSB. In order to allow customers to play a proactive role in the price determination process, the DSB provides the opportunity for them to submit bids for load reductions in specific periods. We study the behavior of DSB inclusion in electricity auctions simulations obtained with a specially developed Lagrangian relaxation scheme that effectively takes advantage of the structure of the problem. We present some numerical results for a 24-hour simulation on a small system. This case study is effective in illustrating the various economic impacts of DSB including system efficiency effects, changes in the system marginal price and the load recovery effects.