Aggregation and Bidding of Residential Demand Response into Wholesale Market

An important stimulus for demand-side participation is to allow the demand response (DR) resources to participate in the wholesale market price formation and load dispatch process. Furthermore, it is vital to assess the impacts of DR resources on distribution systems operation. Enabling proactive residential customers to participate in the DR dispatch and price formation process is specially challenging due to the associated diversity and heterogeneity in power consumption patterns. In this paper, we propose an approach for an aggregator/load-serving entity (LSE) to profitably bid the aggregated residential DR resources in a day-ahead wholesale market. The LSE executes load curtailment contracts with the DR resources where the DR resources are remunerated for curtailment at pre-contracted incentive prices. Due to the uncertainty in the day-ahead market clearing price, the problem is formulated as a stochastic optimization problem. The sample average approximation (SAA) method is used to solve the resulting stochastic optimization problem to generate the day-ahead demand bids for the LSE. The proposed approach is demonstrated using an unbalanced IEEE-123 bus test system. It is observed that the amount of load curtailment from DR resources is inversely proportional to the increase in incentive price and the retail electricity price.