Decentralized optimization of flexible loads operation in electricity markets

Realization of the demand flexibility potential in deregulated power systems requires its suitable integration in electricity markets. In previous work, the authors developed a novel market mechanism combining the solution optimality of traditional centralized mechanisms with the decentralized demand participation structure of dynamic pricing schemes in order to avoid the communication, computation and privacy limitations of the former. A crucial component of this mechanism is the perturbation of flexible loads´ price response in order to limit the creation of new demand peaks by the concentration of their demand towards the same low-priced periods. This paper proposes a suitable price response perturbation approach for both continuously controllable and shiftable loads, involving the application of a relative flexibility limit, and validates its effectiveness through case studies on the UK system with flexible electric vehicles and wet appliances.