Time-varying price elasticity of demand estimation for demand-side smart dynamic pricing

Abstract

The rapid development of the smart energy system promotes bidirectional communications between the supply-side and demand-side. End users can handily receive real-time prices and adjust their electric energy consumption behaviors. Acquiring the time-varying price elasticity of demand (PED) of electricity can help utility companies to understand the time-varying electricity consumption behavior affected by price, thereby facilitating demand-side management. However, estimating time-varying PED is rarely considered in existing studies. This paper bridges the gap, proposing a time-varying PED estimation algorithm. To analyze PEDs more precisely, the proposed algorithm is applied to each appliance based on the advanced non-intrusive load monitoring (NILM) technology. Moreover, a demand-side smart dynamic pricing mechanism is also proposed to provide decision support of individually optimal dynamic pricing for utility companies to encourage end users to participate in the demand response (DR) program. Comprehensive experiments have been conducted to validate the practical feasibility of the proposed mechanism. Numerical simulations show that the proposed mechanism can facilitate the DR program by reducing the peak-to-average ratio (PAR) in electricity consumption without suffering from the price risk.