A classified retail pricing and production scheduling model for industrial customers

Abstract

In the electricity retail market, it’s an important operation way for a retailer to provide diversified services and design appropriate retail pricing strategies that stimulate demand side responses in order to increase profit and maintain customer welfare. This paper proposes a novel retail contract design that a retailer can adopt to provide different time-of-use (TOU) prices for the various types of industrial customers based on their adjustabilities and a part of rewards from the demand response (DR) market to those who respond to the urgent electricity requirements. A bi-level optimization model of retail pricing for classified industrial customers is set up based on their adjustable capacities of production process operations. At the upper level, the retailer’s benefit is maximized considering the stochastic risks of load fluctuation and the spot market. This is achieved based on the electricity consumption strategies of classified industrial consumers, which are obtained from the lower level. Decisions are then made concerning purchases from the spot market and retail pricing strategies for industrial customers. Based on the retail prices from the upper level and industrial production processes modeling, the model at the lower level takes the maximum industrial user’s benefit as the objective to obtain the electricity consumption scheme of each type of industrial user. The model optimizes both the time division and price level of retail TOU prices, resulting in detailed electricity consumption strategies for all types of industrial customers. The results of the cases show that the proposed retail pricing can improve adjustable capacities of industrial production process operations, effectively smooth the load curve of the retailer by making full use of the peak-load-staggered among industrial customers, and boost profits of both the retailer and industrial customers. Thus, a mutually beneficial situation between the retailer and industrial customers is realized.