Demand response cost analysis and its effect on system planning

Abstract

Demand response (DR) is becoming a necessity rather than a choice since its environmentally friendly nature makes it an ideal option for development and deployment in the electricity system, particularly in the high-renewable penetration landscape. However, determining the system costs associated with DR is challenging, as there is ambiguity regarding their allocation. This work uses an enhanced model that optimizes the amount of DR from the residential and services sectors within the system, thereby establishing a range of fixed and variable costs that guarantee a profitable business case for DR implementation. The findings highlight that H&C is the most restrictive technology, as it requires lower costs to achieve a positive business case, followed by DHW and finally the EV flexibility is the one that has wider cost range while still profitable. Furthermore, the consideration of DR costs has been compared with not considering them, thereby justifying their necessity in making optimal investment and operational decisions.