Evaluation of Demand-Side Management over Pricing Competition of Multiple Suppliers Having Heterogeneous Energy Sources

Kireem Han, Joohyung Lee and Junkyun Choi
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Kireem Han: School of Electrical Engineering, Korea Advanced Institute of Science and Technology (KAIST), 34051 Daejeon, Korea
Joohyung Lee: Department of Software, Gachon University, Seongnam 13120, Korea;
Junkyun Choi: School of Electrical Engineering, Korea Advanced Institute of Science and Technology (KAIST), 34051 Daejeon, Korea

Energies, 2017, vol. 10, issue 9, 1-16

Abstract: This study investigates a demand-side management problem in which multiple suppliers compete with each other to maximize their own revenue. We consider that suppliers have heterogeneous energy sources and individually set the unit price of each energy source. Then, consumers that share a net utility react to the suppliers’ decisions on prices by deciding the amount of energy to request, or how to split the consumers’ aggregated demand over multiple suppliers. In this case, the consumers need to consider the power loss and the price to pay for procuring electricity. We analyze the economic benefits of such a pricing competition among suppliers (e.g., a demand-side management that considers consumers’ reaction). This is achieved by designing a hierarchical decision-making scheme as a multileader–multifollower Stackelberg game. We show that the behaviors of both consumers and suppliers based on well-designed utility functions converge to a unique equilibrium solution. This allows them to maximize the payoff from all participating consumers and suppliers. Accordingly, closed-form expressions are provided for the corresponding strategies of the consumers and the suppliers. Finally, we provide numerical examples to illustrate the effectiveness of the solutions. This game-theoretic study provides an example of incentives and insight for demand-side management in future power grids.

Keywords: demand-side management; pricing mechanism; stackelberg game; equilibrium analysis; heterogeneous energy sources (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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