Demand Response as a Market Resource Under the Smart Grid Paradigm

Demand response (DR), distributed generation (DG), and distributed energy storage (DES) are important ingredients of the emerging smart grid paradigm. For ease of reference we refer to these resources collectively as distributed energy resources (DER). Although much of the DER emerging under smart grid are targeted at the distribution level, DER, and more specifically DR resources, are considered important elements for reliable and economic operation of the transmission system and the wholesale markets. In fact, viewed from transmission and wholesale operations, sometimes the term "virtual power plant" is used to refer to these resources. In the context of energy and ancillary service markets facilitated by the independent system operators (ISOs)/regional transmission organizations (RTOs), the market products DER/DR can offer may include energy, ancillary services, and/or capacity, depending on the ISO/RTO market design and applicable operational standards. In this paper we first explore the main industry drivers of smart grid and the different facets of DER under the smart grid paradigm. We then concentrate on DR and summarize the existing and evolving programs at different ISOs/RTOs and the product markets they can participate in. We conclude by addressing some of the challenges and potential solutions for implementation of DR under smart grid and market paradigms.