Decision making of electricity retailer with multiple channels of purchase based on fractile criterion with rational responses of consumers

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This paper presents a novel decision making framework of time-of-use (TOU) price settings and procurement strategies in medium-term planning for an electricity retailer taking into account the rational responses of consumers to the TOU prices. Key ideas of this paper are (1) to introduce the time-series responses of the consumers to the time-varying TOU prices in the medium-term planning; and (2) to find a preferred solution reflecting the preference of the retailer to uncertainty caused by volatile electricity market prices and demand in the non-convex decision making problem. The details of the proposed method to realize the aforementioned key ideas are summarized as follows: (i) assuming the rational responses of the consumers to the time-varying TOU prices offered by the retailers including a decision maker and rival retailers, the decision making problem of the retailer to optimize both the TOU price settings and the purchase allocation in the multiple channels of purchase, i.e., mid-term forward contracts and a short-term day-ahead market, is modeled as the Stackelberg game; (ii) on the non-convex decision making problem formulated as the bi-level programming problem, the preference of the retailer to the uncertainty is reflected by employing the fractile criterion using the stochastic aspiration level specified by the retailer; and (iii) the bi-level programming problem is converted to the mixed integer linear programming problem (MILP), which can be solved by the commercial solver efficiently, by Karush-Kuhn-Tucker optimality conditions and the strong duality theorem. Through the computational experiments, we demonstrate validity of the proposed decision making framework and some findings revealed by introducing the rational response of the consumer.