Prospect Theory-Based Active Consumer Behavior Under Variable Electricity Pricing

Abstract

Active consumers who engage in energy consumption, production and provide ancillary services in a dynamic and interactive manner will be an integral part of the future grid. This paper models and analyzes interaction between active consumers and aggregators with a specific focus on consumer actions in response to real-time electricity pricing and their impacts on grid voltage. First, this paper introduces a unique prospect theory-based consumer behavior model that captures wide range of consumers each with their individual preferences. Second, the interaction between consumers and aggregators is modeled as a Stackelberg game. However, unlike existing game theoretic efforts that assume rational behavior of consumers, the prospect theory-based models systematically incorporate realistic consumer behavior including irrationality. Another unique aspect of the formulation is the inclusion of the physical grid constraints (in terms of voltage violations) within the analysis. In contrast to prior approaches that limit themselves to economic aspects, the proposed techno-economic perspective provides an understanding of the impact of large scale penetration of active consumers on the physical grid. The proposed model is analyzed using simulations on the IEEE 69 bus test system and the impact of irrationality on both consumer/aggregator payoffs and voltage violations is quantified.