Collaborative Decision Approach for Electricity Pricing-demand Response Stackelberg Game

Abstract

Demand response programs are considered as a valuable resource in smart grids that provide several advantages of load shifting, peak load reduction, mediating intermittency of renewable energy integration, etc. Flexible price-based incentives have been recognized as a critical strategy in motivating and compensating consumers’ load adjustment actions for a successful implementation of demand response. Game theoretical approaches, especially Stackelberg games are popularly adopted to model the relationship between electricity price and customers’ demand response and solved by the classical centralized backward induction (BI) method. However, the BI method generally requires convexity of the follower’s model for necessary optimality conditions, and the computational time of any centralized approach increases sharply with larger problem instances. In this paper, the Stackelberg game of electricity pricing-demand response between a distribution system operator (DSO) and load aggregators (LAs) is decomposed based on a collaborative optimization (CO) framework, where each LA is treated as a discipline with its own domain constraints (e.g. building temperature control), while the DSO at the system level tries to reduce the solution discrepancy and guide the searching towards optimality. Several groups of comparison experiments have demonstrated the effectiveness of the proposed collaborative decision approach in solving the demand response game.