Surplus effects of shaving in smart grids.

Summary The valuation of Demand Response (DR) has been the subject of much work both on its introduction and its valuation in the electricity market and on the effects induced in terms of surplus for the community. Using the industrial structure developed by Chao (2011) and day-ahead market data provided by EPEX, we develop a model simulating the introduction of DR in the French electricity market. We show that, for DR to improve collective welfare and create value for the different categories of actors involved, different conditions are required, including limited implementation costs. Using supply and demand curves obtained from the same data, we confirm these initial simulated results. We also analyze the effects in terms of surplus for consumers and suppliers and the extent of compensation paid by the load shedding operators.