Equilibrium analysis of electricity market considering demand response in smart grid

Development of smart grid provides the opportunity for demand side to participate in the electricity market competition. Firstly, based on the oligopolistic competition theory, a novel equilibrium model is proposed to address the interaction between the supply and demand sides, in which the flexible consumers are allowed to take part in the electricity market competition in the form of demand response (DR) aggregators. In this model, all generation firms behave a la supply function competition mode in the electricity wholesale market, while DR aggregators behave a la Cournot mode in the electricity wholesale market. Load shifting and curtailing programs are considered, and the strategic behaviors of DR aggregators with different DR programs are examined. Secondly, the nonlinear complementarity approach is used to solve this equilibrium problem. Finally, numerical examples are presented to verify the effectiveness of the method. Simulation results show the superior performance of the proposed DR model in encouraging flexible consumers to shift the load from peak-period to off-peak-period, flattening the load demand and electricity price curves, and DR aggregators with load shifting and curtailing programs are more competitive and have the ability to grab more DR share, thus improve their profits.