Demand Side Management: A Case for Disruptive Behaviour
The UK electricity system is undergoing a significant transformation. Increasing penetration of renewable generation and integration of distributed energy resources (DERs) such as electrical storage, solar PV and wind generators challenge the traditional way of balancing electricity in the grid, whereby supply matches demand. Demand-side management (DSM) has been shown to offer a promising solution to the above problem. However, models proposed in literature typically consider an isolated system whereby a single aggregator coordinates homogeneous consumers. As a result potential externalities of DSM are overlooked. This work explores the value of DSM in the context of an interacting electricity system, where utilities compete for cheap electricity in the wholesale market. A stylised model of the electricity system is proposed based on the UK, whereby a traditional supplier competes with a ’green’ supplier in the wholesale market. The modelling was able to show that competitive behaviour by electric utilities achieved by means of shifting consumer demand can lead to increased demand peaks in the system and thus higher electricity prices for certain periods during the year. Moreover, the vertically integrated utility benefited more from instructing consumer coordination compared to ’green’ utility, which suggests the vulnerability of the ’green’ utility to electricity price volatility.