The scenario approach for demand response providers in capacity markets

The electricity capacity market is designed to ensure the adequate availability of necessary resources in the long run. Demand resources (DR) could play an important role in the capacity market. However, since the capacity market is a long-term market, the uncertainties become a major problem for demand response providers' (DRPs) decision making. This paper first formulates the DRP decision problem considering uncertainties in capacity market clearing prices and active hour of DRs using a min-max model. Then, a scenario approach is introduced to solve the model in comparison with deterministic, stochastic and robust approaches. It is shown through a case study that the scenario approach offers a number of desirable features including (1) adjustable level of robustness and computational efforts; (2) efficient computation based on historical samples; and (3) theoretically bounded risk of violation based on the number of samples.