# Incentive Price-Based Demand Response in Active Distribution Grids
## 1 Introduction  
At present, the medium-voltage (MV) and low-voltage (LV) power distribution grids are being integrated with large amounts of renewable energy sources (RES) such as solar PV and wind power plants to accelerate the green energy transition [1]. New types of active loads such as electric vehicles and heat pumps and battery energy storage systems (BESS) collectively called distributed energy resources (DERs) are being increasingly used by customers at LV distribution grids [2]. Because of the above reasons, operation of the distribution grids in the near future will be challenging for the distribution system operators (DSOs). Some of the operational challenges are insufficient hosting capacity of the grid for integrating more RES, overloading of substation transformers and cables, under-voltage and over-voltage events [3, 4, 5]. In LV grids, the penetration of kilo Watts level PV systems is increasing and is expected to be high enough to cause reverse power flows during peak PV power production. As residential loads are generally predominant in LV grids, the power demand will have peaks in the morning and evening and it may be less in the noon when the PV generation is at its peak. This could lead to over-voltage events during midday and under-voltage events in the morning and early evening. It is to be noted that as of today, PV inverters are operated at unity pf to maximize the PV power production. The grid codes mandate reactive power capability of PV inverters; e.g., in [6] it is stated that PVs with ratings above \(11\) kW should support voltage regulation in distribution grids. However, the provision of reactive power reduces the active power producing capacity,as the apparent power rating of a PV inverter is a constant. During extreme voltage events, as per the grid codes of some countries (e.g., in Denmark [6]), the PV inverters are required to be disconnected from the grid resulting in the loss of PV power generation. The above solutions do not increase the hosting capacity of the grid and may prohibit the integration of more PVs into the grid. Most of the LV distribution substation transformers do not have automatic tap-changers and their tap settings are to be changed manually if needed. Hence, it is not realistic to use the substation transformers for regulating the grid voltages which can have variations in the order of seconds/minutes due to power fluctuations from RES. DSOs may install reactive power compensation devices such as capacitor banks in the substation to improve the voltage regulation. However, the capital and operating expenditures of DSOs will be increased due to addition of such new devices. Reinforcement of the grid could be carried out to increase the grid's hosting capacity. The grid upgrades include addition of new cables, increase of the capacity of the cables and substation transformers, which are expensive for the DSOs. Modernization of the grid infrastructure and the rollout of advanced information and communication technologies are transforming the power grids to become smarter. Though the communication networks that support power grids as of today are slow to transmit information, the future networks are expected to adopt advanced communication protocols and undergo an upgrade of infrastructure, which will make them suitable for implementation of advanced smart grid technologies [7]. In this context, one of the alternatives to address the integration issues of RES is to employ demand response (DR) schemes. The aim of a DR program/scheme is to manipulate the power consumption of DERs such that the intermittent power generation from RES are fed into the grid to a maximum extent without violating the grid constraints. Thus a DR scheme, in contrast to conventional solutions, utilizes the existing grid resources for optimum energy management. However, the success of a DR program requires active participation of customers who own and operate the flexible power consuming resources also called DERs.