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Extending the bidding format to promote demand response

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  • 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
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    References listed on IDEAS

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    3. 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).
    4. 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).
    5. Zhang, Weiqi & Zavala, Victor M., 2022. "Remunerating space–time, load-shifting flexibility from data centers in electricity markets," Applied Energy, Elsevier, vol. 326(C).
    6. 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.
    7. 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).
    8. Mays, Jacob, 2021. "Missing incentives for flexibility in wholesale electricity markets," Energy Policy, Elsevier, vol. 149(C).
    9. 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.
    10. 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.
    11. 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.
    12. 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.
    13. 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.

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