A Short-Term Decision Model for Electricity Retailers: Electricity Procurement and Time-of-Use Pricing

Feihu Hu, Xuan Feng and Hui Cao
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Feihu Hu: School of Electrical Engineering, Xi’an Jiaotong University, Xi’an 710049, China
Xuan Feng: School of Electrical Engineering, Xi’an Jiaotong University, Xi’an 710049, China
Hui Cao: School of Electrical Engineering, Xi’an Jiaotong University, Xi’an 710049, China

Energies, 2018, vol. 11, issue 12, 1-18

Abstract: This paper establishes a short-term decision model, based on robust optimization, for an electricity retailer to determine the electricity procurement and electricity retail prices. The electricity procurement process includes purchasing electricity from generation companies and from the spot market. The selling prices of electricity for the customers are based on time-of-use (TOU) pricing which is widely employed in modern electricity market as a demand response program. The objective of the model is to maximize the expected profit of the retailer through optimizing the electricity procurement strategy and electricity pricing scheme. A price elasticity matrix (PEM) is adopted to model the demand response. Also, uncertainty in spot prices is modeled using a robust optimization approach, in which price bounds are considered instead of predicted values. Using a robust optimization approach, the retailer can adjust the level of robustness of its decisions through a robust control parameter. A case study is presented to illustrate the performance of the model. The simulation results demonstrate that the developed model is effective in increasing the expected profit of the retailer and flattening the load profiles of customers.

Keywords: robust optimization; demand response; electricity procurement; spot market; time-of-use (TOU) pricing (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: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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