A DSO-level contract market for conditional demand response

This paper proposes a fixed-term (e.g., monthly) Demand Response (DR) contract market. Based on the outcomes of this market, the Distribution System Operator (DSO) pays DR aggregators to modify power consumption within a fixed window each day. Two contract types are introduced: Scheduled contracts require the DR daily, while conditional contracts require the DR after an activation signal from the DSO.

Asymmetric block offers, introducing integer variables, are used to model DR with a rebound effect, potentially causing the DR offers to clear at a loss for the aggregators. Without an activation cost for conditional contracts, the DSO has the incentive to dispatch DR, despite consumer discomfort exceeding grid security benefits.

Thus, the proposed market incorporates side-payments. A numerical study shows that among all DR services considered, the proposed market determines the optimal service for the whole system, ensuring the profitability of each market participant.