Demand Response in the Smart Grid: the Impact of Consumers Temporal Preferences

TL;DR

This paper models demand response in smart grids as a game considering consumer preferences and discomfort, analyzing equilibria under different pricing mechanisms and demonstrating the efficiency of hourly pricing through simulations.

Contribution

It introduces a game-theoretic analysis of demand response with consumer preferences and compares two dynamic pricing mechanisms, revealing the superiority of hourly pricing.

Findings

Hourly mechanism results in lower system costs.

System costs are consistent across preference levels.

Hourly mechanism maintains a low Price of Anarchy.

Abstract

In Demand Response programs, price incentives might not be sufficient to modify residential consumers load profile. Here, we consider that each consumer has a preferred profile and a discomfort cost when deviating from it. Consumers can value this discomfort at a varying level that we take as a parameter. This work analyses Demand Response as a game theoretic environment. We study the equilibria of the game between consumers with preferences within two different dynamic pricing mechanisms, respectively the daily proportional mechanism introduced by Mohsenian-Rad et al, and an hourly proportional mechanism. We give new results about equilibria as functions of the preference level in the case of quadratic system costs and prove that, whatever the preference level, system costs are smaller with the hourly mechanism. We simulate the Demand Response environment using real consumption data from PecanStreet database. While the Price of Anarchy remains always close to one up to 0.1% with the hourly mechanism, it can be more than 10% bigger with the daily mechanism.