THE DESIGN OF OPTIMAL DEMAND MANAGEMENT PROGRAMS

TLDR

Demand management must be adjustable, simple, and reliable to ensure reliable operation in deregulated and uncertain environments. The study examines various voluntary demand management programs such as full interruption, partial interruptions, current/power limits, and guaranteed relief performance. The authors model voluntary participation with compensation as integral, evaluating a random mix of provider and demand characteristics across program types. Optimal demand management requires a small portfolio of incentive programs, and regulatory incentives may be needed to align utility and customer optimality.

Abstract

Reliable operation in a deregulated environment and under conditions of uncertainty requires that loads be considered adjustable. This paper assumes that participation in demand management programs is entirely voluntary, and the compensation for participation is an integral part of any demand management program. Another consideration is simplicity: demand management programs must be simple to understand, simple to use and reliable in their response. This paper considers and describes a variety of voluntary demand management programs, including full interruption, equipment specific partial interruptions, limits in use of current and/or power, and programs that guarantee a certain “relief performance”. It also considers a random mix of provider characteristics and demand characteristics. The paper illustrates that optimality (or nearoptimality) requires not one but a small portfolio of incentive programs. It further illustrates that regulatory incentives may be required to “line up” utility optimality with customer optimality.