Bilevel optimization to deal with demand response in power grids: models, methods and challenges

This paper presents a review of selected models, methods, and challenges associated with the use of bilevel optimization in problems that involve consumers’ demand response arising in the power sector. The main formulations and concepts of bilevel optimization are presented. The importance of demand response as a “dispatchable” resource in the evolution of power networks to smart grids is emphasized. The hierarchical nature of the interaction between decision-makers controlling different sets of variables in several problems involving demand response is highlighted, which establishes bilevel optimization as an adequate approach to decision support. The main concepts and solution approaches to those problems are underlined, in the context of the theoretical, methodological, and computational issues associated with bilevel optimization.