Assessing the competitiveness of demand-side bidding

Demand-side bidding (DSB) provides a very flexible way of meeting the peak load in a production schedule. This paper demonstrates that, in a competitive electricity pool, DSB and other forms of flexible generation can cause sharp and unwarranted price increases if the production schedule is established on the basis of a minimization of the total production cost. Furthermore, the competitiveness of DSB is artificially inflated if the load recovery periods which accompany these load reductions are not taken into consideration by the scheduling program. It is argued that the actual value of DSB should be re-examined in the light of these findings.