  One of the main challenges in the emerging smart grid is the integration of
renewable energy resources (RER). The latter introduces both intermittency and
uncertainty into the grid, both of which can affect the underlying energy
market. An interesting concept that is being explored for mitigating the
integration cost of RERs is Demand Response. Implemented as a time-varying
electricity price in real-time, Demand Response has a direct impact on the
underlying energy market as well. Beginning with an overall model of the major
market participants together with the constraints of transmission and
generation, we analyze the energy market in this paper and derive conditions
for global maximum using standard KKT criteria. The effect of uncertainties in
the RER on the market equilibrium is then quantified, with and without
real-time pricing. Perturbation analysis methods are used to compare the
equilibria in the nominal and perturbed markets. These markets are also
analyzed using a game-theoretic point of view. Sufficient conditions are
derived for the existence of a unique Pure Nash Equilibrium in the nominal
market. The perturbed market is analyzed using the concept of closeness of two
strategic games and the equilibria of close games. This analysis is used to
quantify the effect of uncertainty of RERs and its possible mitigation using
Demand Response. Finally numerical studies are reported using an IEEE 30-bus to
validate the theoretical results.
