Towards optimal customized electricity pricing via iterative two-layer optimization for consumers and prosumers

Abstract

Designing an electricity price mechanism that efficiently enables users to manage their self-production and consumption behavior to accommodate renewable energy and regulate peak load is a hard task with the emergence of prosumer with photovoltaic and energy storage. To address this issue, we propose an iterative two-layer optimization to investigate customized price of electricity for different types of users in the presence of photovoltaic uncertainty. By taking into account power flow restrictions, the model is used to explore the optimal time-of-use, demand, and on-grid prices for both electricity consumers and prosumers. The consumer and prosumer peak-flat-valley periods are initially divided in the upper layer. Then, a model for distribution system operator profit maximization is proposed to minimize operation cost, power loss, and peak–valley difference. A stochastic optimization model is presented in the lower layer for consumer and prosumer to hedge against the risk of uncertain photovoltaic with the aim of minimizing electricity tariff, demand tariff, and life cycle cost of energy storage. Numerical experiments conducted on modified 15-bus and 69-bus distribution systems with different types of users show the effectiveness of the iterative two-layer optimization for customized price of electricity in peak-shaving and valley-filling while ensuring the interests of distribution system operator and users. Results show that the total profit increases by more than 4% and the net load fluctuation variance reduces higher than 20% compared with the traditional pricing method.