Demand side management in power grid enterprise control: A comparison of industrial & social welfare approaches

Despite the recognized importance of demand side management (DSM) for mitigating the impact of variable energy resources and reducing the system costs, the academic and industrial literature have taken divergent approaches to DSM implementation. The prequel to this paper has demonstrated that the netload baseline inflation – a feature particular to the industrial DSM unit commitment formulation – leads to higher and costlier day-ahead scheduling compared to the academic social welfare method. This paper now expands this analysis from a single optimization problem to the full power grid enterprise control with its multiple control layers at their associated time scales. These include unit commitment, economic dispatch and regulation services. It compares the two DSM formulations and quantifies the technical and economic impacts of industrial baseline errors in the day-ahead and real-time markets. The paper concludes that the presence of baseline errors – present only in the industrial model – leads to a cascade of additional system imbalances and costs as compared to the social welfare model. A baseline error introduced in the unit commitment problem will increase costs not just in the day-ahead market, but will also introduce a greater netload error residual in the real-time market causing additional cost and imbalances. These imbalances if left unmitigated degrade system reliability or otherwise require costly regulating reserves to achieve the same performance. An additional baseline error introduced in the economic dispatch further compounds this cascading effect with additional costs in the real-time market, amplified downstream imbalances, and further regulation capacity for its mitigation.