Modelling participation in residential demand response mechanisms in south korea and france: the impacts of inconvenience, customer baseline estimation and marginal pricing

Authors

Seungman Lee

Abstract

In this study, the Cost-Benefit Analyses (CBAs) and the Decision-making Analyses are conducted in order to provide a framework that allows the Demand Response (DR) system operators in South Korea and France to assess the expected level of residential customers’participation according to the loss of consumer surplus based on different Customer Baseline Loads (CBLs). With the economic assumption of rationality, it is found that DR participants shift their loads to just before or after the DR event period as a result of the optimization of the costs considering their stochastic conditions. The degree of the additional inconvenience and its functional form of the DR program participants have significant impacts on their decision-making of the DR participation. The importance of the accurate CBL estimation methods is mathematically and systematically reconfirmed with the CBA model and the Sensitivity Analysis (SA). In terms of the marginal pricing, there should be as tark pricing differentiation between the peak and off-peak periods to provide more incentives. As a higher SMP (System Marginal Price) provides larger remuneration for participants, DR can make a bridge between the wholesale market and the consumers of electricity by sending a wholesale market price signal. With these key results, it is expected that this study can provide the DR system operators in two countries with meaningful policy implications for a better and well-functioning DR market design.