An economic customer-oriented demand response model in electricity markets

Abstract

Consumer choice theory is a branch of microeconomics. This theory relates to adjusting consumption expenditures and consumer demand curve. Consumer choice science is trying to realize the buyer's decision-making process. This science studies customer characteristics, such as behavioral criteria, to understand the consumer's need. The concept of price elasticity of demand (PED) has also been derived from this theory. In fact, the PED is the percentage of changes in the amount of demand relative to the price changes. In consumer choice theory, for each consumer according to behavioral criteria, a unique response to price changes is considered. Therefore, the consumer demand curve is a unique curve versus price changes. In the concept of PED, the elasticity investigation is performed only in a single point or over a small interval of the curve instead of the whole curve which is not suitable. Since most demand response (DR) models have been developed based on this concept, this will also be deemed as a disadvantage for them. In this paper, we propose an economic DR model based on economic theories and mathematical methods. In addition to abate the defects of price-elasticity based DR models, the proposed model has the ability to respond to the various consumers with distinct responses to price changes and can also adjust the consumer's demands according to the consumer's preferences during different periods of a day.