Renewable resources portfolio optimization in the presence of demand response

Demand response is viewed as a practical and relatively low-cost solution to increasing penetration of intermittent renewable generation in bulk electric power systems. This paper examines the question of what is the optimal installed capacity allocation of renewable resources in conjunction with demand response. We introduce an integrated model for total annual system cost that can be used to determine a cost-minimizing allocation of renewable asset investments. The model includes production, uncertainty, emission, capacity expansion and mothballing costs, as well as wind variability and demand elasticity to determine the hourly cost of electricity delivery. The model is applied to a 2024 planning case for British Columbia, Canada. Results show that cost is minimized at about 30% wind generation. We find that the optimal amount of renewable resource is as sensitive to installation cost as it is to a carbon tax. But we find the inter-hourly demand response magnitude is much less helpful in promoting additional renewables than intra-hourly demand elasticity. (C) 2015 Elsevier Ltd. All rights reserved.