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Game-theoretic Approach for Electricity Pricing Between Distribution System Operator and Load Aggregators

by Yang Chen, Mohammed M Olama, Tanmay Rajpurohit, Jin Dong, Yaosuo Xue
Publication Type
Conference Paper
Book Title
IEEE Proceedings
Publication Date
Page Numbers
1 to 6
Conference Name
3rd International Conference on Smart Grid and Smart Cities (ICSGSC 2019)
Conference Location
Berkeley, California, United States of America
Conference Sponsor
Conference Date

Transactive energy has emerged and gained more and more attention in recent years along with smart grid two-way communication technologies. Electricity pricing strategies play a critical role in influencing and shaping the customers’ energy load profile. In this paper, we investigate the electricity pricing strategy between a distribution system operator (DSO) and load aggregators (LAs) by adopting a bi-level Stackelberg game approach. With the purpose of maximizing its own operating revenue as well as better serving its customers, the upper level DSO will determine the price considering how lower level LAs will respond to it. Peak-to-average ratio of the total demand is modeled as a constraint and peak load is penalized at the upper optimization level. Classical backward induction is used to obtain a Nash equilibrium for the formulated bi-level Stackelberg game. Numerical results demonstrate the effectiveness of the proposed game approach in leveraging flexible demand potential to benefit both DSO and LAs.