# Incentive Price-Based Demand Response in Active Distribution Grids
## 2 Demand Response Methods for Control of DERs: A Review and Comparison
### Distributed Demand Response Control Methods of DERs  
To overcome the drawbacks in the centralized DR control method, distributed versions of the centralized methods are proposed in the literature [22; 23; 24; 25]. In distributed optimization based DR methods, the centralized optimization problem will be decomposed into two parts assuming the original problem is separable. Two different optimization problems are solved iteratively by the LVGC and DER controllers independently by exchanging of the so-called dual variables and then combining the results to reach a solution closer to that of the centralized problem. The benefits of the distributed optimization approach are the following. * Both the DSO and the customers can collectively work for an economical demand response. * Computational requirements for the LVGC will be less and the method will be scalable and extensible for various types of DERs. * Customers will have more freedom in terms of their availability, quality of service etc., during their participation in demand response programs. There are two variants of the distributed optimization based DR methods which are either based on energy commitment [26; 27] or calculation of incentive prices for indirect control of DERs [16; 17; 18]. 1. Energy commitment based DR: The LVGC of the DSO and DER controllers of the customers mutually calculate the optimal amount of flexible energy require for a future time period such that the overall costs of operation of the network as well as electricity bills of the customers are minimum. 2. Incentive prices based DR: The LVGC of the DSO and DER controllers of the customers mutually calculate how much incentives in electricity prices are to be provided by the DSO such that the overall costs of operation of the network as well as electricity bills of the customers are minimized. It is to be noted that both these methods require a certain number of iterations between the LVGC and the DER controllers to find the optimal flexibility. The difference between these two methods is that the DSO computes directly the flexible energy in the first approach while the incentive price signals are calculated in the second approach. Though the first approach based on energy commitment mentioned above is better than the centralized optimization method, it has the following drawbacks. * DSOs could not motivate the customers to provide more flexibility than they are prepared to offer as the iterations involve only around requested flexible power from DSO and available flexibility from DERs. * Customers may be motivated to provide more flexibility, if the DSO uses incentive prices as the variables to negotiate with the customers. This paper proposes an incentive price-based demand response method based on the second approach to overcome the above disadvantages. The schematic diagram of the proposed IDR method is shown in Figure 2 and an explanation of its execution is provided below. * An iterative distributed algorithm computes the incentive price signals for each BESS at each time-step. The objective of this algorithm is to minimize the costs of net power consumption over time in the nodes where BESS are connected and to maintain the grid voltages within allowed limits. These iterations take into the consideration of the BESS constraints such as SOC limits, power limits and the grid constraints such as voltage limits while calculating the incentive price signals. * Once the iteration converges within a specified tolerance, the computed incentive prices are communicated to the BESS. The BESS controllers use the incentive signals to decide the charging/discharging power of the BESS until the next time-step. * The incentive price signals will be zero when there are no grid voltage issues, hence the algorithm is iterated only once. In this case, no flexibility is requested from the BESS controller. When incentive price signals are nonzero, the BESS controllers are requested to provide flexibility based on their available power rating and the state of charge.