Here we determines whether the proposed DRX approach represents a new and separate
market for trading DR, and if yes then what is its relationship with the existing markets within a restructured power system? Our discussion is still at a theoritical level while the actual implementation of DRX is beyond the scope of this thesis.
2.4.1 DR versus electricity
Creating a DRX means that DR as market resource is conceptually separated from electric- ity. Such a separation has already been demonstrated to be feasible [64]. While electricity is the major resource to be managed within the physical networks and electricity markets, DR is an additional (minor) resource which is integrated to improve reliability of both net-
Practical implications of the DRX
Figure 2.6:Modified power system structure with: (a) pool-based DRX model; (b) Bilateral DRX model
works and markets. In the next chapter, we will show that DR can be treated as apublic good which refers to a special type of resources with each single unit jointly consumed by multiple independent players.
An integration of a DRX into the power system structure in Fig. 1.1 of the previous chapter will yield a two market domain system shown by Fig. 2.6. Here there are two market domains, electricity and DR. Within the former domain, electricity is managed as both a physical resource delivered by networks and a financial resource exchanged in the markets. Within the latter domain, DR provided by sellers (ECSos) is supplied to buyers (Transcos, Discos and Recos).
2.4.2 DRX versus existing electricity markets
This section discusses relationship between the proposed DRX market and those which have been well-established in the restructured power system. As shown in Table 2.3, such existing markets include [12], [6]: 1) those for trading electricity as primary resource on various timescales (i.e., hour-ahead, month-ahead, etc); 2) those for trading (secondary)
flexibility resources (i.e., generation reserve) on top of the electricity markets; 3) those for trading the right of using transmission, and/or distribution, networks; and 4) those for trading “greenness” derived from renewable power generation, i.e., Renewable Energy Certificates (REC). Together these existing markets constitute an exchange economy in a deregulated environment.
Table 2.3: List of markets within a restructured power system
Markets Products Sellers Buyers Timescales
Wholesale
Electricity Gencos Recos and Year-ahead or
forward market Large customers Month-ahead
Retail
Electricity Recos Small businesses and Year-ahead or
forward market Households Month-ahead
Wholesale
Electricity Gencos Recos and Day-ahead or
spot market Large customers Hour-ahead
Reserve market Generation reserves Gencos Transcos Minute-ahead or Second-ahead DRX market
DR resources ESCos Recos, Transcos, Hour-ahead
(proposed) Discos (intended)
Transmission
Network usages Transcos Gencos, Recos, Any timescale
right market Large customers
REC market RE certificates RE-based Investors Any timescale Gencos Customers
As an addition to this economy, DRX as another type of flexibility trades can be placed at the same business level with the reserve markets [64]. While reserve refers to output adjustment of fast-responding generators on top of nominal power supply, DR is load adjustment on top of electricity consumption by end-users. This similarity means that both markets for DR and reserve are secondary to the electricity markets. The former aims at improving the reliability and efficiency of the latter, and are independent of other secondary markets such as the markets for greenness or network usages.
Within the exchange economy, players have different roles for different markets. For example, electricity customers buy electricity from the retail market and sell DR to the DRX market; Transcos and Discos provide network services and buy DR for their network reliability management. None of these entities plays a central role of managing the whole economy that is rather supervised by government delegates, i.e., the regulator, the energy MO, the ISO, and the DRXO. These bodies act for public interest which generally ensures fairness across all market participants by eliminating sources of market manipulation and enhancing market efficiency.
Practical implications of the DRX
2.4.3 Timescale
An important operational issue for any DRX market relates to scheduling timing. Since the DRX is to be synchronized with the existing markets in a power system, the time frame of DRX must coincide with that of the system. Although both time frames could be divided into different time scales such as day ahead, hour ahead, real time, etc [64], this thesis addresses only the hour ahead timescale that is just before a “gate closure” (i.e., the time interval in which both electrical energy trading and DRX must halt for the ISO and Transcos to balance the whole power system using available generation reserves [64]). Operating the DRX on this time scale also provides Recos with increased flexibility to adjust the electricity demand of their customers by buying DR before the trading gate is closed. In summary, the DRX is considered to operate synchronously with the existing hour-ahead electricity markets in a power system.
2.4.4 Interactions between DRX and other markets
The interaction between various markets including the DRX is a complex issue. It occurs whenever prices of different products in different markets relate to each other due to “real- locating” these products. For example, if the Transco has enough reserve for maintaining network security, it would not purchase DR to be used for the same security purpose. In this case, the reserve market goes up by which reserve price increases due to the increased reserve demand, while the DRX market goes down with DR price decreased because less people are going to buy DR.
Study of the interaction between DRX and other electricity markets entails analyzing all economic, social and political aspects of the exchange economy. From an economic point of view, one should evaluate the relative potentials of various markets, in the sense that those markets which are more important than others are allowed to go up to enhance the overall benefit for the economy. The potentials evaluation for each market is generally based on a pricing consideration under demand-supply balancing, transaction costs, and other important economic conditions.
From a social perspective, one should determine welfares for different groups of cus- tomers having different levels of consumption flexibility. In general, those inflexible cus- tomers (i.e. disable or old) for whom electricity consumption is vital should be subsided by which they are offered less expensive electricity and do not have to curtail loads for providing DR. Such subsidies, however, will be likely to down all relevant markets where the inflexible customers are involved in.
From a political perspective, one may have to consider interventions exerted on different markets by the government. Such interventions are to serve certain complex political goals that is, however, beyond the scope of this thesis. In general, any market experiencing more
Figure 2.7:A conceptual illustration of smart grid [69]
government interventions than other markets becomes less competitive and consequently goes down.
Ideally, achieving an optimal outcome of DRX-based markets interaction requires an optimal balance between these three essential dimensions of the economy (i.e., economic, social, and political).