Investigating and presenting a hybrid algorithm for energy management in the electricity market with a suitable response to demand

Energy management includes planning and operation of energy production and consumption units as well as energy distribution and storage. Its goals are to conserve resources, protect the climate and save money, while users have constant access to the energy they need. Energy management is closely related to environmental management, production management, procurement (logistics) and other established business functions. VDI-Guideline ۴۶۰۲ published a definition that includes its economic dimension: "Energy management is the active, organized and systematic coordination of the provision, transformation, distribution and use of energy to meet needs, taking into account environmental and economic objectives." It is a systematic effort to optimize energy efficiency for specific political, economic and environmental goals through engineering and management techniques.In this article we report an experiment that examines how demand-side bidding can discipline generators in a market for electric power. First we develop a treatment without demand-side bidding; two large firms are allocated baseload and intermediate cost generators such that either firm might unilaterally withhold the capacity of its intermediate cost generators from the market to benefit from the supracompetitive prices that would result from only selling its baseload units. In a converse treatment, ownership of some of the intermediate cost generators is transferred from each of these firms to two other firms such that no one firm could unilaterally restrict output to spawn supracompetitive prices. Having established a well controlled data set with price spikes paralleling those observed in the naturally occurring economy, we also extend the design to include demand-side bidding. We find that demand-side bidding completely neutralizes the exercise of market power and eliminates price spikes even in the presence of structural market power.

Keywords:

Demand response , scheduling , distributed generators , optimization , smart grid.