Demand response strategy management with active and reactive power incentive in the smart grid: a two-level optimization approach

High penetration of distributed generators (DGs) using renewable energy sources (RESs) is raising some important issues in the operation of modern po­wer system. The output power of RESs fluctuates very steeply, and that include uncertainty with weather conditions. This situation causes voltage deviation and reverse power flow. Several methods have been proposed for solving these problems. Fundamentally, these methods involve reactive power control for voltage deviation and/or the installation of large battery energy storage system (BESS) at the interconnection point for reverse power flow. In order to reduce the installation cost of static var compensator (SVC), Distribution Company (DisCo) gives reactive power incentive to the cooperating customers. On the other hand, photovoltaic (PV) generator, energy storage and electric vehicle (EV) are introduced in customer side with the aim of achieving zero net energy homes (ZEHs). This paper proposes not only reactive power control but also active power flow control using house BESS and EV. Moreover, incentive method is proposed to promote participation of customers in the control operation. Demand response (DR) system is verified with several DR menu. To create profit for both side of DisCo and customer, two level optimization approach is executed in this research. Mathematical modeling of price elasticity and detailed simulations are executed by case study. The effectiveness of the proposed incentive menu is demonstrated by using heuristic optimization method.