The intermittent nature of the wind generation poses an obstacle to high penetration of wind energy in electric power systems. Demand response (DR) increases the flexibility of the power system by allowing very fast upward/downward changes in the demand. This potential can be interpreted as the ability to provide fast upward/downward reserves, facilitating the utilization of the wind power in the power system. Demand response exchange (DRX) market is a separate market in which DR is treated as a virtual resource to be exchanged between DR buyers and sellers. The major advantage of the DRX market in comparison to other DR proposals is that it allocates benefits and payments across all participants, fairly. However, there are still obstacles to its integration into the existing power markets. This paper proposes a short-term framework for DRX market that considers the interactions between the DRX market and energy/reserve markets. The proposed framework is aimed at reducing the operational costs incurred by the uncertainty of the wind power and providing a fair mechanism for valuation of the DR as a virtual resource. A stochastic programming model is used to clear the DRX market considering the wind power production scenarios. To illustrate the efficiency of the proposed DRX market framework, it is implemented on a simple and a realistic case study.

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