A Methodological Proposal for Implementing Demand‐Shifting Strategies in the Wholesale Electricity Market

Abstract

The energy transition has shown that fossil generation can be complemented with renewable energy and other resources capable of providing flexibility to the energy system’s operation, in compliance with the wholesale electricity market’s rules. This paper proposes a market‐based methodology for introducing flexible demand in the energy dispatch, optimizing the scheduling of electricity system operation in the short‐term, and considers the challenge of implementing an incentive scheme for participants in demand‐response programs. The scheme includes the criteria of the elasticity of substitution and a renewable energy quota. This methodology is focused on a strategic demand shift to minimize the cost of supply; increase the dispatch of renewable energy; control CO2 emissions; and satisfy the generation, demand, and transmission operating constraints. These conditions encourage the development of a simulation tool that allows a sensitivity analysis to aid de-cision‐making by operators and agents. The proposed methodology optimizes the operational cost of generation supply and specific performance indicators to determine the percentages of demand shift, the amount of CO2 emissions, the ratio of unserved power, the demand benefits obtained from an incentive scheme, and the natural market behavior.