A new method for determining the demand reserve offer function

Following advances in control and information technology, consumers are able to provide system reserve through flexible demand. In this way, consumers could maximise their benefit from electricity markets. This paper presents a new method for calculating the demand reserve offer function, where the costs and benefits that consumers derive from their participation in the reserve market are considered. A new stochastic modelling approach to demand-side reserve provision in co-optimised electricity and reserve markets with demand response included as a reserve provider is also presented. The stochastic model includes demand flexibility in order to realistically model the motivation and ability of the demand-side as a reserve provider. The proposed stochastic market model is formulated as a linear two-stage mixed-integer stochastic program, and was successfully tested using the IEEE Reliability Test System. We compare the results for the proposed method with those obtained using constant demand reserve offer functions. The results show that for the proposed demand reserve offer function, the optimal point, where the difference between consumer reserve cost and benefit is minimal, can be determined using the proposed method. The impact of demand flexibility on scheduling reserve, costs, benefits that demand derives from participating in the reserve market and energy payback effect were also examined. The results show that demand elasticity has a great influence on demand-side reserve provision and that sufficiently flexible demand is able to successfully compete with generators in providing system reserve. Finally, demand-side reserve provision leads to more reliable power system operation, due to less involuntary load curtailment and lower operating costs.

► A new approach to the stochastic modelling of the demand-side reserve provision.
► A new method for calculation of the demand reserve offer price function is proposed.
► Costs and benefits that consumers derive from their participation are considered.
► Demand elasticity has a great influence on demand-side reserve provision.
► More reliable power system operation and lower operating costs are obtained.