Bidding and Market Dynamics In The Brazilian Structural Demand Response Program

This paper studies the Structural demand response Program (SP) in Brazil from a consumer’s perspective. We begin by formalizing the SP’s operational and financial mechanisms, and then develop a strategic bidding methodology that follows a twostage decision-making process, formulated as a nonconvex bilevel optimization model. In the first stage, consumers determine optimal bids that balance program revenues with production-related opportunity costs, while the second stage models the all-or-nothing marketclearing process as a Mixed-Integer Linear Programming problem. To address computational challenges posed by the strategic bidding model, the nonconvexities are linearized via binary relations, and the bilevel model is reformulated as an equivalent single-level problem solved via a tailored Column-and-Constraint Generation algorithm. Empirical evidence from a case study based on data from the Brazilian power system and market environment suggests that the SP’s design incentivizes energy-intensive consumers with flexible demand profiles. In contrast, baseline constraints hinder broader participation by priceresponsive consumers.