Assessment of energy demand response options in smart grid utilizing the stochastic programming approach

The smart grid enables two-way energy demand response capability through which utility service providers can offer customers special call options for energy load curtailment. If a utility customer has a capability to perform a rapid cost and benefit analysis of the offer in an optimal manner and accept the offer, the customer can earn both an option premium to participate, and a strike price for load curtailments when asked. However, today most industrial customers still lack the ability to perform such an optimal and rapid cost and benefit analysis. This paper proposes a stochastic-programming enabled decision process to be used to evaluate the impact of load curtailments within a required short response time. This approach can build agility into utility customers' energy decisions, thereby helping exploit the energy demand response capability and achieve strategic advantage over competitors. An illustrative example of the proposed decision process under a call-option based energy demand response scenario is presented.