Abstract
The sheer growth of electricity demand and the rising number of electricity-hungry devices have highlighted and elevated the need of addressing the demand response management problem in residential smart grid systems. In this article, a novel contract-theoretic demand response management (DRM) framework in residential smart grid systems is introduced based on the principles of labor economics. The residential households produce and consume electricity, acting as dynamic prosumers. Initially, the prosumers' personal electricity generation and consumption characteristics are captured by introducing the concept of prosumers' types. Then, the prosumers' and the electricity market's profit is depicted in representative utility functions. Based on the labor economics principles, Contract Theory is adopted to design the interactions among the electricity market, which offers personalized rewards to the prosumers in order to buy electricity at an announced price, and the prosumers, who offer their “effort” by paying for the purchased electricity. The contract-theoretic DRM problem is formulated as a maximization problem of the electricity market's utility, while jointly guaranteeing the optimal satisfaction of the prosumers, under the scenarios of complete and incomplete information from the electricity market's perspective regarding knowing or not the prosumers' types, respectively. The corresponding optimization problems are solved following a convex optimization approach and the optimal contracts, i.e., rewards and efforts, are determined. Detailed numerical results obtained via modeling and simulation, highlight the key operation features and superiority of the proposed framework.
Highlights
Smart grid systems have been introduced as an efficient solution to the global energy crisis given their inherent characteristics of communication, control, and optimization that can conclude to the real-time balance among the power supply and demand [1]
The results reveal that the contract-theoretic demand response management (DRM) framework achieves only 36.3% reduction of the overall smard grid system’s social welfare under the worst case scenario of incomplete information compared to the benchmarking use case of complete information
The results show that the prosumers benefit regarding their achieved utility under our proposed contract-theoretic framework by approximately 42% on average compared to the type-agnostic framework due to the fact that the electricity market offers them personalized rewards to better incentivize them to purchase electricity at the announced price
Summary
Smart grid systems have been introduced as an efficient solution to the global energy crisis given their inherent characteristics of communication, control, and optimization that can conclude to the real-time balance among the power supply and demand [1]. The Demand Response (DR) has become a vital and critical component of the smart grid systems, enabling the consumers to directly interact with the electricity market by dynamically adapting their electricity consumption based on the announced price and the supply availability [2]. The electricity generation surplus from the residential power generation systems is stored in rechargeable batteries (e.g., lithium-ion batteries and liquid electrolyte ‘‘flow batteries’’) or in the electric vehicles (EVs). Both electricity storage alternatives can charge at night when the price is low and the supply is high, while sell back to the smart grid when the electricity demand is high [6].
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