Quantitative Risk Management by Demand Response in Distribution Networks

Demand response (DR) is a versatile tool capable of providing sophisticated solutions and competitive services. Currently, the utilities pursue such services, as the reliability improvement, by continuous infrastructure investment and maintenance. In many cases, DR can provide reliability benefits, as it allows distribution network operators to reshape the load profile when a contingency is imminent. The quantification of the DR benefits is necessary to understand its economic and financial impact on the power sector. Methodologies used in risk management can be adapted for this purpose. In this paper, we propose a method to build a detailed reliability model, to assess the expected reliability indices, and to manage the financial risk of the reliability performance by DR in distribution networks subject to performance-based regulation. The outcome of the proposed method is the quantification of the relation between the risk and return of DR portfolios, in terms of conditional value-at-risk and ex-pected return, respectively. The results demonstrate that the method can be used as a decision support system for optimal DR allocation to trade off efficiently between the reliability performance risk and the expected return.