Optimal Consumption Policies for Power-Constrained Flexible Loads Under Dynamic Pricing

Abstract

This paper analyzes the response of an individual consumer with a flexible demand for electricity to exogenous and stochastic electricity prices. The contributions of this paper are twofold. First, we propose a comprehensive model for which the optimal policy can be explicitly computed. The proposed consumer model features a time varying bound on power consumption, the presence of a nondeferrable load profile, the presence of a load profile that can be deferred up to a deadline, and the possibility of curtailment. Second, we describe the algorithm that, via explicit backward iterations of the Bellman equation, returns the optimal response of such consumer in a very general energy market scenario featuring a correlated/nonstationary price process and multiple energy procurement sources.