Abstract
Critical peak pricing (CPP) is a demand response program that can be used to maximize profits for a load serving entity in a deregulated market environment. Like other such programs, however, CPP is not free from the payback phenomenon: a rise in consumption after a critical event. This payback has a negative effect on profits and thus must be appropriately considered when designing a CPP scheme. However, few studies have examined CPP scheme design considering payback. This study thus characterizes payback using three parameters (duration, amount, and pattern) and examines payback effects on the optimal schedule of critical events and on the optimal peak rate for two specific payback patterns. This analysis is verified through numerical simulations. The results demonstrate the need to properly consider payback parameters when designing a profit-maximizing CPP scheme.
Highlights
Demand response (DR) programs give customers a more active role in the operation of the power system, allowing them to change their consumption patterns
Recent deregulation of the power industry has made it possible for DR programs to be implemented in a market environment [2]
The profit is larger in the non-payback case than in either case with payback, verifying that the payback phenomenon has a negative effect on the load serving entities (LSEs)’s profits due to the additional cost of the paid-back demand
Summary
Demand response (DR) programs give customers a more active role in the operation of the power system, allowing them to change their consumption patterns. They have been implemented to ensure secure power system operation when the system suffers from severe supply-demand imbalances [1]. The purchase prices are determined for a specified time interval (e.g., every five min) based on the supply and demand for electricity [4]. They are inherently time-varying, and will be denoted here as “real-time market clearing prices” (RTMCPs). Dynamic pricing schemes are typically designed and included in DR programs to take variations in the RTMCPs into consideration [6]
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