Hierarchical Electricity Market and Incentive-based Demand Response Management: A Stackelberg Game-based Approach

This paper presents a study on a resource trading process aimed at assisting the grid operator (GO) in managing system imbalances during the intra-day market. The research incorporates two types of incentives, taking into account the perspectives of service providers (SPs) and the GO. The in-teractions among the entities involved are modelled using the Stackelberg game, while Stackelberg equilibrium (SE) is achieved through a distributed algorithm utilizing local information only. The numerical analysis indicates that demand response (DR) programs play a crucial role in enabling the GO to operate the power system reliably and economically. Moreover, a comparison between the two case studies reveals that implementing shorter timeframes for DR programs can yield enhanced demand reduction by residential consumers (RCs), resulting in potential cost savings and increased revenue for service providers facilitated by effective incentives. These results highlight the value of DR programs as a valuable tool for the GO in optimizing power system operations.