A new wholesale bidding mechanism for enhanced demand response in smart grids

Calls to improve customer participation as a key element of smart grids have reinvigorated interest in demand-side features such as distributed generation, on-site storage and demand response. In the context of deregulated market structures, these features can improve flexibility of demand, but at the cost of added uncertainty. Therefore, how to implement these features under deregulated power markets is worth consideration. To address the problems induced by the demand-side participation features together with deregulated electricity markets, this paper presents a new bidding mechanism, which uses Price Elasticity Matrices (PEM) to model the concerned features. Three typical traditional bidding mechanisms are reviewed and compared with the proposed bidding mechanism. This paper also presents an algorithm guaranteeing better convergence to carry out the proposed bidding mechanism. The concept of a stepped supply curve's relative slope is defined in the algorithm. Multiple benefits induced are shown by numerical examples in a day-ahead wholesale electricity pool under real-time pricing.