Towards the Interactive Effects of Demand Response Participation on Electricity Spot Market Price
For electricity market operators and consumers, this paper demonstrates that demand response can stabilize spot prices and lower costs, but the analysis is limited to a single week of data and a specific region, making it incremental.
This paper investigates the effect of demand response (DR) participation on electricity spot market prices, finding that DR programs smooth out price spikes and reduce customer electricity costs. Using a demand-price elasticity model and price regression on Connecticut data from summer 2014, the study shows DR mitigates supply scarcity impacts.
The electricity market is threatened by supply scarcity, which may lead to very sharp price spikes in the spot market. On the other hand, demand-side's activities could effectively mitigate the supply scarcity and absorb most of these shocks and therefore smooth out the price volatility. In this paper, the positive effects of employing demand response programs on the spot market price are investigated. A demand-price elasticity based model is used to simulate the customer reaction function in the presence of a real time pricing. The demand achieve by DR program is used to adjust the spot market price by using a price regression model. SAS software is used to run the multiple linear regression model and MATLAB is used to simulate the demand response model. The approach is applied on one week data in summer 2014 of Connecticut in New England ISO. It could be concluded from the results of this study that applying DR program smooths out most of the price spikes in the electricity spot market and considerably reduces the customers' electricity cost.