A Two-Stage Mechanism for Demand Response Markets

Demand response involves system operators using incentives to modulate electricity consumption during peak hours or when faced with an incidental supply shortage. However, typically have imperfect information about their customers’ baselines, that is, had the incentive been absent. The standard approach estimate reduction in a customer’s then is counterfactual baseline. this not robust estimation errors strategic exploitation by customers and can potentially lead overpayments who do reduce under payments those do. Moreover, optimal power reductions of depend on costs they incur for curtailing consumption, which general are private knowledge customers, could strategically misreport effort improve own respective utilities even if it deteriorates overall cost. two-stage mechanism proposed letter circumvents aforementioned issues. In day-ahead market, participating loads required submit only probabilistic description next-day operator planning. It real-time, called upon demand response, report baselines costs. They receive credits below reported baselines. calculating guarantees compatibility truthful reporting probability distribution market baseline cost real-time.