Strategic CBDR bidding considering FTR and wind power

Abstract

The independent system operators (ISOs) usually offer financial transmission right (FTR) as a financial instrument for electricity market participants to hedge against the transmission congestion cost. Meanwhile, the development of demand response (DR) provides load serving entities (LSEs) opportunities to perform coupon based demand response (CBDR) programs, and thus LSEs can behave as strategic bidders in the whole-sale market by adjusting its demand level. In the existing approaches for modelling CBDR, the potential impact of FTR which leads LSEs to obtain the congestion compensation under a high load level is overlooked. Therefore, this study proposes a comprehensive strategic CBDR model in which the LSE's profit is maximised by providing CBDR to customers and the congestion compensation from the LSE bidder's FTR holding is also considered. The proposed model is formulated as a bi-level optimisation problem with the LSE's net revenue maximisation as the upper level and the ISO's economic dispatch considering wind power uncertainty as the lower level problem. The bi-level model is addressed with mathematic program with equilibrium constraints technique and mixed-integer linear programming, which can be solved using available optimisation software tools. In addition, the case studies of an illustrative two bus system, the PJM 5-bus system, and IEEE 39-bus system verify the proposed method.