Load Shifting in the Smart Grid: To Participate or Not?

TL;DR

This paper investigates how customer behavior, modeled through prospect theory, influences demand-side management participation in smart grids, revealing that behavioral factors significantly affect grid load and participation levels.

Contribution

It introduces a novel game-theoretic model incorporating prospect theory to analyze customer decision-making in demand-side management, extending beyond traditional rational assumptions.

Findings

Customer behavior significantly impacts DSM participation.

Grid load and participation depend on players' rationality and risk aversion.

A new algorithm reaches an epsilon-mixed Nash equilibrium.

Abstract

Demand-side management (DSM) has emerged as an important smart grid feature that allows utility companies to maintain desirable grid loads. However, the success of DSM is contingent on active customer participation. Indeed, most existing DSM studies are based on game-theoretic models that assume customers will act rationally and will voluntarily participate in DSM. In contrast, in this paper, the impact of customers' subjective behavior on each other's DSM decisions is explicitly accounted for. In particular, a noncooperative game is formulated between grid customers in which each customer can decide on whether to participate in DSM or not. In this game, customers seek to minimize a cost function that reflects their total payment for electricity. Unlike classical game-theoretic DSM studies which assume that customers are rational in their decision-making, a novel approach is proposed, based on the framework of prospect theory (PT), to explicitly incorporate the impact of customer behavior on DSM decisions. To solve the proposed game under both conventional game theory and PT, a new algorithm based on fictitious player is proposed using which the game will reach an epsilon-mixed Nash equilibrium. Simulation results assess the impact of customer behavior on demand-side management. In particular, the overall participation level and grid load can depend significantly on the rationality level of the players and their risk aversion tendency.