Real-time pricing scheme in smart grid considering time preference: Game theoretic approach

Abstract

Unbalanced power demand across time slots causes overload in a specific time zone. Various studies have proved that this can be mitigated through smart grid and price policy, but research on time preference is insufficient. This study proposed a real-time pricing model on a smart grid through a two-stage Stackelberg game model based on a utility function that reflects the user’s time preference. In the first step, the suppliers determine the profit-maximizing price, and then, the users decide the electricity usage schedule according to the given price. Nash equilibrium and comparative analysis of the proposed game explain the relationship between time preference, price, and usage. Additionally, a Monte Carlo simulation demonstrated the effect of the change in time preference distribution. The experimental results confirmed that the proposed real-time pricing method lowers peak-to-average ratio (PAR) and increases overall social welfare. This study is meaningful in that it presents a pricing method that considers both users’ and suppliers’ strategies with time preference. It is expected that the proposed method would contribute to a reduction in the need for additional power generation facilities through efficient operation of the smart grid.