Integrating demand response into electricity market

It is widely agreed that an increased communication among different groups (generators, retailers and customers) in electricity market would produce benefit not only for single group but also for the market as a whole. In traditional demand side pricing model, the unit cost of electricity for retailer in each hour is assumed to be a constant. When integrating demand and supply side into one framework, the unit cost of electricity always changes due to the change of demand from customers and change of generation cost in supply side. In order to schedule the production scheme for generators and select profit-optimal pricing strategy for retailer under this framework, this paper builds a new integrated supply and demand response mechanism for electricity market. The main contribution of this paper is the proposed mechanism finds the match equilibrium between the demand and supply side when integrating demand response into electricity market. Simulation results confirm that the proposed mechanism can generate accurate prediction of electricity demand, maximize retailers' profit under the minimum production cost in supply side, and achieve the requirements of ISO for Unit Commitment and Economic Dispatch.