A Dynamic Market Mechanism for Integration of Renewables and Demand Response

The most formidable challenge in assembling a Smart Grid is the integration of a high penetration of renewables. Demand Response, a largely promising concept, is increasingly discussed as a means to cope with the intermittent and uncertain renewables. In this paper, we propose a dynamic market mechanism that reaches the market equilibrium through continuous negotiations between key market players. In addition to incorporating renewables, this market mechanism also incorporates a quantitative taxonomy of demand response devices, based on the inherent magnitude, run-time, and integral constraints of demands. The dynamic market mechanism is evaluated on an IEEE 118 Bus system, a high fidelity simulation model of the Midwestern United States power grid. The results show how the proposed mechanism can be utilized to determine combinations of demand response devices in the presence of intermittent and uncertain renewables with varying levels of penetration so as to result in a desired level of Social Welfare.