Time-of-Use Electricity Pricing Optimization Considering Investment Savings of Power System

Abstract

Demand response based on price signal or other incentive mechanism is the significant measure to guarantee economic operation of power system. Time-of-Use (TOU) pricing provides differentiated prices during spike-peak-flat-valley periods, which motivates consumers to manage their electricity demand and consequently realize peak-shaving and valley-filling. The improvement of load’s characteristics can result in cost savings of power grid’s planning. To incentivize consumers effectively, sharing the investment cost savings is necessary. This paper formulates the TOU pricing optimization model considering investment cost savings sharing. The investment cost savings are formulated by cost difference of power system’s planning and embedded into the TOU optimization model by lower-level optimization. Then the proposed nonconvex programming problem is simplified to a convex programming problem. The proposed TOU pricing optimization method is testified using a provincial data. The results show the proposed method realizes peak-shaving and valley filling. Meanwhile the investment cost savings are delivered to consumers.