A top-down market model for demand response procurement via aggregators

Due to the inevitable prediction errors and/or sudden ramping down, the high penetration of wind power in electricity markets entails significant challenges. In this paper, a new demand response (DR) design targeting the power deficit (mainly caused by wind power) in the real-time market is proposed. When a power deficit is expected in the short-term operation, in comparison to exaggerated spot prices, the system operator (SO) may procure DR which performs equally to grid with a lower price. As the introduction of DR aggregators, a top-down market structure is modelled. At the higher level, a hill-climbing iteration mechanism is adopted between the SO and aggregators, whilst at the lower level, each DR aggregator receives demand reduction bids from eligible voluntary consumers. Numerical analysis illustrates that the hierarchical model could efficiently help the system reach market equilibrium and arise benefits for participants.