# Implementation of a Demand-Side Management Solution for South Korea's Demand Response Program
## 2 Materials and Methods  
### Status of Demand Resources Market, South Korea  
The role of the Korea Power Exchange (KPX) is to control the operation of South Korea's electricity market and the power system, as well as execute real-time dispatch and establish the basic plan for supply and demand. Every year, the KPX has issued an annual report for the electricity market trend and analysis. In this section, the status of the demand resource market from the 2016 annual report is summarized. Demand response refers to a suite of policies and institutions to provide efficient and stable electric power service at the lowest cost by helping consumers change their consumption pattern. Under the current contract-based utility rate schemes in South Korea, consumers have a very weak incentive to voluntarily participate in the demand response [26]. The introduction of the demand response program can effectively stabilize the electricity market and the operation of its system. The demand response can decrease investment in the power system including generation, transmission, and transformation networks; enhancing reliability in electric-power supply. Consumers can take part in the demand response programs by reducing their electricity usage at critical times through monitoring demand or securing a load that can be shut down by KPX and then making a bid on a load. In early 2008, when the demand response market opened, it was bidding-based sponsored by the Electricity Industry Fund and, now, is making a transition into an advanced demand response market where market price and real-time system operation are linked with each other for resource transaction. In 2012, a smart demand response market opened where demand resources in small and medium quantity were traded in an effort to tap into the highly reliable and easily accessible demand resources using smart grid technology. The smart demand response market makes payment at a fixed rate on the condition of keeping the capacity to be curtailed unchanged. A payment is also made to those who cut down demand at the system operator's request for load curtailment. As the Electricity Business Act was revised to allow demand resource trading in the electricity market, in 2014, the demand response market and smart demand response market sponsored by the Electricity Industry Fund were abolished in late 2014, and the elimination of the two-month-ahead and week-ahead programs followed in late 2015 [26]. At the end of 2015, a new demand response market replaced these previous programs and was integrated into the electricity market. Figure 1 shows the process of the trading mechanism of a demand response market. The demand response market trades demand resources arranged by retailers, each demand resource is required to come from more than ten end users, and must be valued at above 10 MW. The DR aggregator collects consumers to organize demand resources. After registering with KPX, these resources are certified for trading under the same rules governing the centrally dispatched generators. Demand resources are put on a bid against power generation resources on a daily basis, and when sold, demand curtailment begins. In the system operation process, consumers are required to cut down on demand within an hour of a dispatch order. Figure 1: Trading mechanism of a demand response market. The KPX calculates curtailed energy and makes payment to retailers who allocate the profits to consumers. As indicated in Tables 1 and 2, the demand response market has seen significant progress from both quantity and quality perspectives. The number of consumers has grown from 90 to 3592 and curtailed energy amounts to 175,771 MWh, up by 342.6 times from 513 MWh, becoming a world-renowned global demand response market. The transition to an advanced demand response market is also politically compelling. As the program matures along with demand resources integrated into the electricity market, market participants will feel easy to understand the system and the market will flourish.