Strategic interaction among distribution network operator and residential end-users via distribution use of system charges in demand-side management environment

Price-based demand side management involves end-users responding to per-slot energy prices to optimize their energy consumption and reduce bills. The per-slot energy price constitutes distribution use of system charges which makeup 19%–24% of it. Existing work primarily focuses on the interaction between distribution network operators, larger storage/generation facilities, and prosumers overlooking the fairness of tariff structures used to recover distribution network operators’ revenue. This oversight leads to unfair pricing for end-users, as it disregards factors such as the distance power must travel and the utilization of devices like transformers and transmission lines. This study employ the MW-Miles Distribution use of System Charges charging methodology to address this issue and designs a method to couple per-slot energy price to distribution use of system charges, considering distribution network operator as market players in a Stackelberg game framework. Two cases are devised to update distribution network operator-controlled parameters, with three perturbation strategies discussed for each case. The interaction between independent end-users is modeled using a noncooperative game framework, analyzing Nash equilibrium existence and algorithm convergence. An IEEE-33 bus system with residential end-users, home appliances, distributed energy storage, and dispatchable distributed generation is chosen for analysis. To account for end-user discomfort due to power-shiftable devices, a discomfort objective is included alongside energy bill savings. The results demonstrate a 7.67% increase in distribution network operators’ revenue when actively participating in demand-side management program compared to its passive role as a utility.