Impact of Price-Elastic Heat Demand on the Equilibrium of Distribution Power Market

Abstract

With the development of the power market, pricing-based demand response is becoming a promising mechanism in the distribution network, where some flexible load demand such as heat demand varies according to the real-time locational marginal price (LMP). Such responsive load may leave a complex impact on the power market, as responsive load and LMP will affect each other, and eventually reaches an equilibrium. As a result, the sensitivity of the LMP becomes harder to analyze because the sensitivity is related to the variation of the equilibrium point. In this paper, we point out that the challenge of such sensitivity analysis actually comes from the fact that the pricing-based demand response explicitly introduces dual variables into the optimization problem, which has not yet been considered in the existing sensitivity studies. Based on such analysis, an advanced form of sensitivity analysis is proposed to acquire the variation of the LMP with load demand when considering demand response in the distribution system.