Analysis of cooperation between central power utility and dispersed cogeneration systems through time-of-use pricing

Abstract

Because of an increase in peak electricity demand during summer daytime, a decrease in the annual load factor of power generation facilities has been one of the serious problems for central power utility systems. On the other hand, utility-connected dispersed cogeneration systems have been increasingly installed for energy supply in industrial and commercial sectors. This paper analyzes the cooperative relationship between power utility and cogeneration systems through time-of-use pricing. A game-theory approach in mathematical programming, i.e., bilevel programming, is applied to attain this objective. At the upper level, a power utility system determines the time-of-use rates for demand and energy charges of electricity purchased by a cogeneration system to maximize its load factor, and at the lower level, a cogeneration system determines its design and operation to minimize its annual total cost. Through a basic case study, it has been shown how the time-of-use rates are determined to attain the cooperative relationship between power utility and cogeneration systems.