An Analysis From the Perspective of Direct Power-Purchase for Industrial Users: Should the Power Grid Company Implement Incentive-Based Demand Response Management?

Abstract

As a means for the power grid company to guide industrial users to reduce power consumption through economic compensation, incentive-based demand response management (IBDRM) plays an important role in the process that industrial users purchase power directly from power plants (direct power-purchase for short). Therefore, this paper studies the impacts of IBDRM on the power grid company, power plants, and industrial users from the perspective of industrial users’ direct power-purchase, so as to analyze whether the power grid company should implement IBDRM in direct power-purchase. First, we model the interactions of the power grid company, the power plant, and the industrial user under different scenarios, including Case N (the power grid company does not implement IBDRM) and Case R (the power grid company implements IBDRM) by using Stackelberg game. Then, we solve the models to get equilibrium results. The primary contributions of this article include following parts: 1) Compared with Case N, the power plant’s power selling price and the industrial user’s power-purchase quantity are higher under Case R, and both are negatively correlated with the compensation for the power plant. 2) The power grid company should implement IBDRM in direct power-purchase. Because under Case R, the industrial user reduces the power consumption, the profits of the power grid company and the power plant are higher, and the social welfare is also greater. 3) Under Case R, we also find that the social welfare is positively correlated with the compensation for the industrial user.