We present a novel method of determining the contribution of load-shifting
Demand Response (DR) to energy and reserve markets. We model DR in an Mixed
Complementarity Problem (MCP) framework with high levels of wind penetration.
Investment, exit and operational decisions are optimised simultaneously. We examine
the potential for DR to participate in both energy and reserve markets. DR participation
in the energy market reduces costs and prices but the impact of DR participation in
reserve markets is limited. DR and wind generation are strongly complementary, due to
the ability of DR to mitigate against the variability of wind generation, with the highest
impacts of DR seen at high levels of wind penetration. DR participation in the energy
market gives rise to lower equilibrium levels of investment in conventional generation
and induces a Pareto improvement versus a market with no DR participation. The total
impact of DR is highly dependent on specific system characteristics