A Multi-perspective Model for Evaluation of Residential Thermal Demand Response

Demand response (DR) is envisaged to be of significance for enhancing the flexibility of power systems. The distributed nature of residential demand-side resources necessitates the introduction of an aggregator/retailer to represent the flexible demand in the electricity market. However, the objectives of the residential consumers, the retailer and the System Operator might not be aligned. This paper presents a multi-perspective model which integrates the optimization problems of these strategic decision makers within a single framework for evaluation of residential thermal DR. The multi-perspective model is formulated as a bilevel optimization problem and incorporates detailed building state-space models of residential thermal demand. Comparison of the multi-perspective model with existing market-based models shows that it is able to provide a holistic view of residential DR by capturing the interactions in both the retail and wholesale markets. The results also show that centralized optimization models would over-estimate the system value of DR in the presence of strategic market participants. Detailed sensitivity analyses using the multi-perspective model reveal interesting insights on the welfare distribution aspects of DR. The results show that in addition to consumers’ flexibility, retail contract design will also play a major role in determining the welfare distribution among the involved entities.