Demand Management for Peak-to-Average Ratio Minimization via Intraday Block Pricing

Price based demand response schemes may significantly improve power system efficiency. Additionally, it is desired that such schemes yield improved power operation, by reducing the peak consumption. This paper proposes the
Intraday Block Pricing
(IBP) scheme, aiming to promote effective demand response among consumers by charging their electricity usage based on intraday time-slots. To design the prices associated with the proposed scheme, we formulate a bilevel optimization problem that aims to minimize the Peak-to-Average Ratio (PAR) and simultaneously benefit the consumers and the utility company. The bilevel problem is converted into a single-level Mathematical Program with Equilibrium Constraints (MPEC). The resulting MPEC is non-convex and includes nonlinear constraints. Hence, to obtain a solution, it is relaxed into a Mixed Integer Linear Program by dealing with all nonlinearities. To evaluate the conservativeness of the proposed approach, a lower bound to the cost of the original bilevel problem is obtained. The applicability of the proposed scheme is demonstrated with simulations on various case studies, which exhibit a significant reduction in PAR and economic gains for the utility company and consumers. Moreover, simulation results show that the solutions of the original and relaxed problems are equivalent, demonstrating the effectiveness of the proposed solution approach. Further simulation results demonstrate significant advantages in the performance of the IBP scheme when compared to existing schemes in the literature.