The traditional dichotomy is between incentive-based DR programs and time and price-based programs(Albadi & El-Saadany, 2008) .For the price-based programs, the load reduction occurs because prices have reached a pre-specified high level. Incentive programs require the customer to shed load in response to a system-wide events. in reality, the line between these programs is often blurry.
Among the incentive programs, market-based programs are growing in popularitydue to a recent high-profile FERC ruling [3]. FERC has mandated that wholesale energy market operators pay locational marginal price (LMP)[4] to demand response resources, effectively paying them as if they were analogous to traditional generating units such as natural gas plants.This has been seen as a boon to the demand response aggregators who can now enlist customers in DR programs and bid them load directly into wholesale markets, as opposed to being a middleman between utilities and customers. It has also encouraged a host of programs where customers can bid their loads in themselves. There will be more discussion of this ruling very soon.
[4] The hypothetical incremental cost to the system that would occur if one were to dispatch an additional kWh at each specific node on the grid. The locational element implies that it includes the cost of congestion, because more heavily congested nodes will cost more.
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