Game-Theoretic Approach for Electricity Pricing between Distribution System Operator and Load Aggregators

Abstract

Transactive energy has emerged and gained more and more attention in recent years. Electricity pricing strategies play a critical role in influencing and shaping the customers' energy load profile. In this paper, we investigate the electricity pricing strategy between a distribution system operator (DSO) and load aggregators (LAs) by adopting a bilevel Stackelberg game approach. With the purpose of maximizing its own operating revenue as well as better serving its customers, the upper level DSO will determine electricity prices while considering how lower level LAs will respond to it. Peak-to-average ratio of the total demand could be limited by a preferred value, and peak load is penalized at the upper optimization level. Numerical results demonstrate the effectiveness of the proposed game approach in leveraging flexible demand potential to benefit both DSO and LAs.