IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v86y2015icp82-92.html
   My bibliography  Save this article

Extending the bidding format to promote demand response

Author

Listed:
  • Liu, Yanchao
  • Holzer, Jesse T.
  • Ferris, Michael C.

Abstract

We propose an extended bidding structure to allow more realistic demand characteristics and behaviors to be expressed via flexible bids. In today's ISO-run energy markets, demand bid formats are all separable over time. However, a significant and growing segment of demand can be shifted across time and therefore has no way to bid its true valuation of consumption. We propose additional bid types that allow deferrable, adjustable and storage-type loads to better express their value, and thus elicit demand response in the most natural way – via direct participation in the market. We show that the additional bid types are easily incorporated into the existing market with no technological barrier and that they preserve the market's efficiency and incentive-compatibility properties. Using real market data, we give a numerical demonstration that the extended bid format could substantially increase social welfare, and also present additional insight on storage expansion scenarios.

Suggested Citation

  • Liu, Yanchao & Holzer, Jesse T. & Ferris, Michael C., 2015. "Extending the bidding format to promote demand response," Energy Policy, Elsevier, vol. 86(C), pages 82-92.
    • Handle: RePEc:eee:enepol:v:86:y:2015:i:c:p:82-92
    DOI: 10.1016/j.enpol.2015.06.030
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421515002487
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2015.06.030?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Walawalkar, Rahul & Apt, Jay & Mancini, Rick, 2007. "Economics of electric energy storage for energy arbitrage and regulation in New York," Energy Policy, Elsevier, vol. 35(4), pages 2558-2568, April.
    2. O'Neill, Richard P. & Sotkiewicz, Paul M. & Hobbs, Benjamin F. & Rothkopf, Michael H. & Stewart, William R., 2005. "Efficient market-clearing prices in markets with nonconvexities," European Journal of Operational Research, Elsevier, vol. 164(1), pages 269-285, July.
    3. Johnson, Raymond B. & Oren, Shmuel S. & Svoboda, Alva J., 1997. "Equity and efficiency of unit commitment in competitive electricity markets," Utilities Policy, Elsevier, vol. 6(1), pages 9-19, March.
    4. Hung-po Chao, 2011. "Demand response in wholesale electricity markets: the choice of customer baseline," Journal of Regulatory Economics, Springer, vol. 39(1), pages 68-88, February.
    5. Theodore Groves & John O. Ledyard, 1985. "Incentive Compatibility Ten Years Later," Discussion Papers 648, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martin Bichler & Johannes Knörr & Felipe Maldonado, 2023. "Pricing in Nonconvex Markets: How to Price Electricity in the Presence of Demand Response," Information Systems Research, INFORMS, vol. 34(2), pages 652-675, June.
    2. Silva-Rodriguez, Lina & Sanjab, Anibal & Fumagalli, Elena & Virag, Ana & Gibescu, Madeleine, 2022. "Short term wholesale electricity market designs: A review of identified challenges and promising solutions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 160(C).
    3. Mays, Jacob, 2021. "Missing incentives for flexibility in wholesale electricity markets," Energy Policy, Elsevier, vol. 149(C).
    4. Lina Silva-Rodriguez & Anibal Sanjab & Elena Fumagalli & Ana Virag & Madeleine Gibescu, 2020. "Short Term Electricity Market Designs: Identified Challenges and Promising Solutions," Papers 2011.04587, arXiv.org.
    5. Shafie-khah, M. & Heydarian-Forushani, E. & Golshan, M.E.H. & Siano, P. & Moghaddam, M.P. & Sheikh-El-Eslami, M.K. & Catalão, J.P.S., 2016. "Optimal trading of plug-in electric vehicle aggregation agents in a market environment for sustainability," Applied Energy, Elsevier, vol. 162(C), pages 601-612.
    6. Neves, Diana & Pina, André & Silva, Carlos A., 2018. "Assessment of the potential use of demand response in DHW systems on isolated microgrids," Renewable Energy, Elsevier, vol. 115(C), pages 989-998.
    7. Anna Schwele & Christos Ordoudis & Pierre Pinson & Jalal Kazempour, 2021. "Coordination of power and natural gas markets via financial instruments," Computational Management Science, Springer, vol. 18(4), pages 505-538, October.
    8. Izabela Zoltowska & Jeremy Lin, 2021. "Optimal Charging Schedule Planning for Electric Buses Using Aggregated Day-Ahead Auction Bids," Energies, MDPI, vol. 14(16), pages 1-18, August.
    9. Bobo, Lucien & Mitridati, Lesia & Taylor, Josh A. & Pinson, Pierre & Kazempour, Jalal, 2021. "Price-region bids in electricity markets," European Journal of Operational Research, Elsevier, vol. 295(3), pages 1056-1073.
    10. Bradley, Peter & Coke, Alexia & Leach, Matthew, 2016. "Financial incentive approaches for reducing peak electricity demand, experience from pilot trials with a UK energy provider," Energy Policy, Elsevier, vol. 98(C), pages 108-120.
    11. Fang, Xichen & Guo, Hongye & Zheng, Kedi & Liu, Shuangquan & Chen, Qixin, 2024. "Real-time capacity cost obligations design in high-renewables energy markets," Renewable and Sustainable Energy Reviews, Elsevier, vol. 191(C).
    12. Mitridati, Lesia & Kazempour, Jalal & Pinson, Pierre, 2021. "Design and game-Theoretic analysis of community-Based market mechanisms in heat and electricity systems," Omega, Elsevier, vol. 99(C).
    13. Zhang, Weiqi & Zavala, Victor M., 2022. "Remunerating space–time, load-shifting flexibility from data centers in electricity markets," Applied Energy, Elsevier, vol. 326(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ramteen Sioshansi & Emma Nicholson, 2011. "Towards equilibrium offers in unit commitment auctions with nonconvex costs," Journal of Regulatory Economics, Springer, vol. 40(1), pages 41-61, August.
    2. Sioshansi, Ramteen & Oren, Shmuel & O'Neill, Richard, 2010. "Three-part auctions versus self-commitment in day-ahead electricity markets," Utilities Policy, Elsevier, vol. 18(4), pages 165-173, December.
    3. Vadim Borokhov, 2022. "Utilizing the redundant constraints for the uplift payment elimination," Operational Research, Springer, vol. 22(2), pages 1377-1402, April.
    4. Ramteen Sioshansi and Ashlin Tignor, 2012. "Do Centrally Committed Electricity Markets Provide Useful Price Signals?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    5. Wang, Yi & Yang, Zhifang & Yu, Juan & Liu, Sixu, 2023. "Pricing in non-convex electricity markets with flexible trade-off of pricing properties," Energy, Elsevier, vol. 274(C).
    6. Ramteen Sioshansi & Paul Denholm & Thomas Jenkin, 2012. "Market and Policy Barriers to Deployment of Energy Storage," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    7. Sioshansi, Ramteen, 2014. "Pricing in centrally committed electricity markets," Utilities Policy, Elsevier, vol. 31(C), pages 143-145.
    8. Jungsub Sim & Minsoo Kim & Dongjoo Kim & Hongseok Kim, 2021. "Cloud Energy Storage System Operation with Capacity P2P Transaction," Energies, MDPI, vol. 14(2), pages 1-13, January.
    9. Megan Culler & Hannah Burroughs, 2021. "Cybersecurity Considerations for Grid-Connected Batteries with Hardware Demonstrations," Energies, MDPI, vol. 14(11), pages 1-20, May.
    10. Araoz, Veronica & Jörnsten, Kurt, 2011. "Semi-Lagrangean approach for price discovery in markets with non-convexities," European Journal of Operational Research, Elsevier, vol. 214(2), pages 411-417, October.
    11. Pedro Crespo Del Granado & Stein Wallace & Zhan Pang, 2016. "The impact of wind uncertainty on the strategic valuation of distributed electricity storage," Computational Management Science, Springer, vol. 13(1), pages 5-27, January.
    12. McKelvey, Bill & Wycisk, Christine & Hülsmann, Michael, 2009. "Designing an electronic auction market for complex 'smart parts' logistics: Options based on LeBaron's computational stock market," International Journal of Production Economics, Elsevier, vol. 120(2), pages 476-494, August.
    13. John McMillan & John Whalley & Zhu Li Jing, 1987. "Incentive Effects of Price Rises and Payment-System Changes on Chinese Agricultural Productivity Growth," NBER Working Papers 2148, National Bureau of Economic Research, Inc.
    14. Zugang Liu & Anna Nagurney, 2009. "An integrated electric power supply chain and fuel market network framework: Theoretical modeling with empirical analysis for New England," Naval Research Logistics (NRL), John Wiley & Sons, vol. 56(7), pages 600-624, October.
    15. Susan I. Cohen & Martin Loeb, 1988. "Improving performance through cost allocation," Contemporary Accounting Research, John Wiley & Sons, vol. 5(1), pages 70-95, September.
    16. Richard O’Neill & Emily Fisher & Benjamin Hobbs & Ross Baldick, 2008. "Towards a complete real-time electricity market design," Journal of Regulatory Economics, Springer, vol. 34(3), pages 220-250, December.
    17. Camelo, Sergio & Papavasiliou, Anthony & de Castro, Luciano & Riascos, Álvaro & Oren, Shmuel, 2018. "A structural model to evaluate the transition from self-commitment to centralized unit commitment," Energy Economics, Elsevier, vol. 75(C), pages 560-572.
    18. Wade, N.S. & Taylor, P.C. & Lang, P.D. & Jones, P.R., 2010. "Evaluating the benefits of an electrical energy storage system in a future smart grid," Energy Policy, Elsevier, vol. 38(11), pages 7180-7188, November.
    19. Gokturk Poyrazoglu & HyungSeon Oh, 2019. "Co-optimization of Transmission Maintenance Scheduling and Production Cost Minimization," Energies, MDPI, vol. 12(15), pages 1-18, July.
    20. McConnell, Dylan & Forcey, Tim & Sandiford, Mike, 2015. "Estimating the value of electricity storage in an energy-only wholesale market," Applied Energy, Elsevier, vol. 159(C), pages 422-432.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:86:y:2015:i:c:p:82-92. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.