Assessment of energy demand response options in smart grid utilizing the stochastic programming approach

The smart grid enables two-way energy demand response capability through which utility service providers can offer customers special call options for energy load curtailment. If a utility customer has a capability to perform a rapid cost and benefit analysis of the offer in an optimal manner and accept the offer, the customer can earn both an option premium to participate, and a strike price for load curtailments when asked. However, today most industrial customers still lack the ability to perform such an optimal and rapid cost and benefit analysis. This paper proposes a stochastic-programming enabled decision process to be used to evaluate the impact of load curtailments within a required short response time. This approach can build agility into utility customers´ energy decisions, thereby helping exploit the energy demand response capability and achieve strategic advantage over competitors. An illustrative example of the proposed decision process under a call-option based energy demand response scenario is presented.