Variability and Uncertainties caused by renewable energy sources have called for large amount of balancing services. Demand side resources (DSRs) can be a good alternative of traditional generating units to provide balancing service. In the areas where the electricity market has not been fully established, e.g., China, DSRs can help balance the power system with incentive-based demand response programs. However, there is a lack of information about the interruption cost of consumers in these areas, making it hard to determine the rational amount of capacity incentive and energy compensation for the participants of demand response programs.
This paper proposes an algorithm to calculate the amount of capacity incentive and energy compensation for demand response programs when there lacks the information about interruption cost. Available statistical information of interruption cost in referenced areas is selected as the referenced data. Interruption cost of the targeted area is converted from the referenced area by product per electricity consumption. On this basis, capacity incentive and energy compensation are obtained to minimize the payment to consumers. Moreover, the loss of consumers is guaranteed to be covered by the revenue they earned from load serving entities.