A User-Oriented Pricing Design for Demand Response in Smart Grid

Abstract

Demand response (DR) programs are designed to affect the energy consumption behavior of end-users in smart grid. However, most existing pricing designs for DR programs ignore the influence of end-users’s diversity and personal preference. Thus, in this paper, we investigate an incentive pricing design based on the utility maximization rule with consideration of end-users’ preference and appliances’ operational patterns. In particular, the utility company determines the pricing policy by trading off the budget revenue and social obligation, while each end-user aims to maximize their own utility profits with high satisfaction level by scheduling multiclass appliances. We formulate the conflict and cooperative relationship between the utility company and end-users as a Stackelberg game, and the equilibrium points are obtained by the backward induction method, which exists and is unique. At the equilibrium, the utility company adopts real-time pricing (RTP) scheme to coordinate end-users to fulfill the benefit of themselves, i.e., under such price, end-users automatically maximize overall utility profits of the overall system. We propose a distributed algorithm and an adaptive pricing scheme for the utility company and end-users to jointly achieve the best performance of the entire system. Finally, extensive simulation results based on real operation data show the effectiveness of the proposed scheme.