A Decentralized Electricity Market Scheme Enabling Demand Response Deployment

In smart grid, demand response (DR) programs can be deployed to encourage electricity consumers towards scheduling their controllable demands to off-peak periods. Motivating the consumers to participate in a DR program is a challenging task, as they experience a confidential discomfort cost by modifying their load demand from the desirable pattern to the scheduled pattern. Meanwhile, to balance the load and generation, the independent system operator (ISO) requires to motivate the suppliers towards modifying their generation profiles to follow the changes in the load demands. Additionally, to protect the entities’ privacy, the ISO needs to apply an effective well-designed pricing scheme. In this paper, we focus on proposing a decentralized DR framework considering the operating constraints of the grid. In our proposed framework, each individual entity responds to the control signals called conjectured prices from the ISO to modify its demand or generation profile with the locally-available information. We formulate the centralized problem of the ISO that jointly minimizes the suppliers’ generation cost and the consumers’ discomfort cost. We also discuss how the ISO determines the conjectured prices to motivate the entities toward an operating point that coincides with the solution to the centralized problem. The performance of the proposed algorithm is evaluated on a modified IEEE 14-bus in reducing the suppliers’ and consumers’ cost, as well as the transmission lines congestion.