Incentive based demand response (IBDR) programs have significant unused potential especially for small customers. In this paper, an IBDR program is proposed for generator outages. Although not all generator outages lead to reliability concerns, they often result in market price volatility. Since outage conditions are an important factor in price volatility, the novel idea of generator outage ranking based on their economic effect is proposed. Reducing peak locational marginal price (LMP) can bring considerable saving for utilities. An IBDR program can decrease LMP significantly even with modest levels of participation. The proposed IBDR in this paper is implemented in only one region but still has system wide effects. Results show electrical distance from most expensive generator in a system is a good risk indicator for generator outages.

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