Impact of Demand Response on Generation Expansion Planning in the Brazilian Interconnected Power System

Demand response is defined as the change in electricity use by consumers from the normal consumption pattern in response to changes in energy price or the receipt of incentives to induce lower energy at higher price points or when reliability of the system is impaired. Demand response can improve system adequacy and substantially reduce the investment need to meet peak demand, shifting consumption to times of low demand and adding stability to the system. This paper presents a methodology for demand response to participate in generation planning and to compete on equal terms with other supply-side energy resources such as hydroelectric, thermal and wind power plants. For this purpose, the demand response modeling is performed endogenously in the planning model. Thus, this mechanism competes on equal terms with all other resources, such as hydroelectric, wind and thermal. The methodology is applied to the Brazilian electric system in the medium term energy planning for a 10-year horizon and the results indicate that, with demand response, there is a considerable impact on the generation expansion on the study horizon, postponing and avoiding the construction of others power plants.