Electricity market equilibrium models with dynamic demand functions

Many electricity market models have either mostly ignored the demand response to changing prices (e.g., day-ahead models with mostly fixed demand), or, at the other extreme, they assumed that the full demand response occurred within one hour. Moreover, the capital stock adjustment and the forward-looking nature of consumers are usually omitted. In this paper, we propose variational inequality models for electricity markets with dynamic demand models where the intertemporal nature of consumption (i.e., the current consumption decision affects capital stock/habits and thus the future preferences and demand) is recognized. It is intended that the proposed models would develop a framework for electricity market equilibrium models that incorporate the dynamics of the demand side.