The penetration of wind power generation is expected to increase in power systems, dramatically. The unpredictable nature of the wind generation poses an obstacle to high penetration of wind energy in the electric power systems. Demand response (DR) may be considered as an efficient approach to cope with the energy unbalances caused by the wind power intermittency. Fair mechanism for pricing of the DR may increase the demand-side participation which consequently facilitates wind power integration in the power systems. This paper focuses on the economic evaluation of the DR according to its potential for mitigating the wind power forecast error in the power system operation. Demand increase, similar to the demand curtailment, is considered as a DR resource and evaluated in this paper. For this purpose, first an insight is provided into the power system operation under the high wind power penetration with the aim of extracting the DR benefits. Based on the DR benefits, a mathematical model is developed to find the maximum monetary incentive for the DR that the system operator is willing to pay to the DR providers. In the proposed model, DR’s potential in reducing the cost of supplying load as well as its capability in reducing the cost of system reserve, start up and shut down of units, load shedding, and wind power spillage are considered. The results of the proposed evaluation method provide valuable information for both the system operator and demand response providers. The proposed method is implemented on an example and a realistic case study and discussions on results are presented.

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