Optimal pricing strategy of power-retailing companies considering demand response in block bidding markets

Abstract

Block bidding market (BBM) is a new electricity market mode in the day-ahead market, which is in the stage ofdevelopment and promotion in China. It is based on the idea that energy should have the same price according to thecontinuous duration of load. In this study, the authors propose an optimisation model of pricing and purchasing strategy forpower-retailing companies in BBMs, based on bilateral contracts with customers and portfolio management of demandresponse resources. The model consists of an expected profit maximisation problem of supplying energy to end-customers, anda total cost minimisation problem concerning the dispatching of fixed loads and shiftable loads. The proposed model isformulated as a bi-level mixed-integer non-linear program. A load division method is proposed to get better division result byeliminating duration restrictions on divided blocks. The proposed approximate solving algorithm overcomes the diculties inlinearisation and gets rid of the inuence of initial value. The strategy is applied to an actual case and is simulated based on realdata. Simulation results show that the proposed model has great peak-shaving effects, and can effectively bring more profit tothe power-retailing companies while reducing electricity bills of customers.