Personalized real time pricing for efficient and fair demand response in energy cooperatives and highly competitive flexibility markets

Abstract

This paper contributes to the well-known challenge of active user participation in demand side management (DSM). In DSM, there is a need for modern pricing mechanisms that will be able to effectively incentivize selfishly behaving users in modifying their energy consumption pattern towards system-level goals like energy efficiency. Three generally desired properties of DSM algorithms are: user satisfaction, energy cost minimization and fairness. In this paper, a personalized–real time pricing (P-RTP) mechanism design framework is proposed that fairly allocates the energy cost reduction only to the users that provoke it. Thus, the proposed mechanism achieves significant reduction of the energy cost without sacrificing at all the welfare (user satisfaction) of electricity consumers. The business model that the proposed mechanism envisages is highly competitive flexibility market environments as well as energy cooperatives.