IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v348y2023ics0306261923009091.html
   My bibliography  Save this article

Personalized retail pricing design for smart metering consumers in electricity market

Author

Listed:
  • Qiu, Dawei
  • Wang, Yi
  • Wang, Junkai
  • Jiang, Chuanwen
  • Strbac, Goran

Abstract

In the current deregulated electricity market, flexible consumers are more active in participating in market activities via the representation of electricity retailers. However, without an effective communication infrastructure, the connection between retailers and the consumers they serve is incomplete. Nowadays, smart meters are being rolled out worldwide to enhance the connection and data exchanges between retailers and consumers. Specifically, smart meters enable retailers to provide customers with detailed information about retail tariffs and their energy usage at different times of the day, which in turn enables customers to manage their energy use more proactively. This paper drops this assumption and makes use of data acquired from smart meters to design a personalized retail pricing scheme for different types of consumers. To formulate this problem, a bi-level optimization model is proposed, with the upper-level problem representing the pricing decision made by the retailer and two lower-level problems representing the demand response of consumers and the wholesale market clearing process, respectively. Afterward, we convert this bi-level optimization model into a single-level mathematical program with equilibrium constraints by using its Karush Kuhn Tucker optimality conditions and complementary conditions. The scope of the examined case studies is fourfold. First, consumers are classified based on their daily load profiles using the advanced clustering method. Second, the physical benefit of fully exploring the consumer’s demand flexibility as well as the economic benefits of increasing retailers’ profitability and reducing consumers’ energy bills are evaluated with respect to the traditional uniform retail pricing scheme. Third, the impacts of consumers’ demand flexibility on electricity market outcomes and business cases are investigated. Finally, the proposed personalized retail pricing scheme is verified to relieve the strategic retailer’s market power reduction caused by the flexibility of demand, which is beneficial to the retailer’s profitability.

Suggested Citation

  • Qiu, Dawei & Wang, Yi & Wang, Junkai & Jiang, Chuanwen & Strbac, Goran, 2023. "Personalized retail pricing design for smart metering consumers in electricity market," Applied Energy, Elsevier, vol. 348(C).
  • Handle: RePEc:eee:appene:v:348:y:2023:i:c:s0306261923009091
    DOI: 10.1016/j.apenergy.2023.121545
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261923009091
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.apenergy.2023.121545?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Deng, Tingting & Yan, Wenzhou & Nojavan, Sayyad & Jermsittiparsert, Kittisak, 2020. "Risk evaluation and retail electricity pricing using downside risk constraints method," Energy, Elsevier, vol. 192(C).
    2. Zeng, Lanting & Qiu, Dawei & Sun, Mingyang, 2022. "Resilience enhancement of multi-agent reinforcement learning-based demand response against adversarial attacks," Applied Energy, Elsevier, vol. 324(C).
    3. Nojavan, Sayyad & Zare, Kazem & Mohammadi-Ivatloo, Behnam, 2017. "Optimal stochastic energy management of retailer based on selling price determination under smart grid environment in the presence of demand response program," Applied Energy, Elsevier, vol. 187(C), pages 449-464.
    4. Ju, Liwei & Wu, Jing & Lin, Hongyu & Tan, Qinliang & Li, Gen & Tan, Zhongfu & Li, Jiayu, 2020. "Robust purchase and sale transactions optimization strategy for electricity retailers with energy storage system considering two-stage demand response," Applied Energy, Elsevier, vol. 271(C).
    5. Di Silvestre, Maria Luisa & Favuzza, Salvatore & Riva Sanseverino, Eleonora & Zizzo, Gaetano, 2018. "How Decarbonization, Digitalization and Decentralization are changing key power infrastructures," Renewable and Sustainable Energy Reviews, Elsevier, vol. 93(C), pages 483-498.
    6. Qiu, Dawei & Ye, Yujian & Papadaskalopoulos, Dimitrios & Strbac, Goran, 2021. "Scalable coordinated management of peer-to-peer energy trading: A multi-cluster deep reinforcement learning approach," Applied Energy, Elsevier, vol. 292(C).
    7. Wang, Y. & Rousis, A. Oulis & Strbac, G., 2022. "Resilience-driven optimal sizing and pre-positioning of mobile energy storage systems in decentralized networked microgrids," Applied Energy, Elsevier, vol. 305(C).
    8. McLoughlin, Fintan & Duffy, Aidan & Conlon, Michael, 2015. "A clustering approach to domestic electricity load profile characterisation using smart metering data," Applied Energy, Elsevier, vol. 141(C), pages 190-199.
    9. Zhao, Pengxiang & Dong, Zhao Yang & Meng, Ke & Kong, Weicong & Yang, Jiajia, 2021. "Household power usage pattern filtering-based residential electricity plan recommender system," Applied Energy, Elsevier, vol. 298(C).
    10. Rajabi, Amin & Eskandari, Mohsen & Ghadi, Mojtaba Jabbari & Li, Li & Zhang, Jiangfeng & Siano, Pierluigi, 2020. "A comparative study of clustering techniques for electrical load pattern segmentation," Renewable and Sustainable Energy Reviews, Elsevier, vol. 120(C).
    11. Zugno, Marco & Morales, Juan Miguel & Pinson, Pierre & Madsen, Henrik, 2013. "A bilevel model for electricity retailers' participation in a demand response market environment," Energy Economics, Elsevier, vol. 36(C), pages 182-197.
    12. Hua, Weiqi & Jiang, Jing & Sun, Hongjian & Wu, Jianzhong, 2020. "A blockchain based peer-to-peer trading framework integrating energy and carbon markets," Applied Energy, Elsevier, vol. 279(C).
    13. Räsänen, Teemu & Ruuskanen, Juhani & Kolehmainen, Mikko, 2008. "Reducing energy consumption by using self-organizing maps to create more personalized electricity use information," Applied Energy, Elsevier, vol. 85(9), pages 830-840, September.
    14. Rhodes, Joshua D. & Cole, Wesley J. & Upshaw, Charles R. & Edgar, Thomas F. & Webber, Michael E., 2014. "Clustering analysis of residential electricity demand profiles," Applied Energy, Elsevier, vol. 135(C), pages 461-471.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Jun & Xu, Jian & Wang, Jingjing & Ke, Deping & Yao, Liangzhong & Zhou, Yue & Liao, Siyang, 2024. "Two-stage distributionally robust offering and pricing strategy for a price-maker virtual power plant," Applied Energy, Elsevier, vol. 363(C).
    2. Morteza Neishaboori & Alireza Arshadi Khamseh & Abolfazl Mirzazadeh & Mostafa Esmaeeli & Hamed Davari Ardakani, 2024. "Stochastic optimal pricing for retail electricity considering demand response, renewable energy sources and environmental effects," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 23(5), pages 435-451, October.
    3. Michalakopoulos, Vasilis & Sarmas, Elissaios & Papias, Ioannis & Skaloumpakas, Panagiotis & Marinakis, Vangelis & Doukas, Haris, 2024. "A machine learning-based framework for clustering residential electricity load profiles to enhance demand response programs," Applied Energy, Elsevier, vol. 361(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wen, Hanguan & Liu, Xiufeng & Yang, Ming & Lei, Bo & Xu, Cheng & Chen, Zhe, 2024. "A novel approach for identifying customer groups for personalized demand-side management services using household socio-demographic data," Energy, Elsevier, vol. 286(C).
    2. Michalakopoulos, Vasilis & Sarmas, Elissaios & Papias, Ioannis & Skaloumpakas, Panagiotis & Marinakis, Vangelis & Doukas, Haris, 2024. "A machine learning-based framework for clustering residential electricity load profiles to enhance demand response programs," Applied Energy, Elsevier, vol. 361(C).
    3. Rajabi, Amin & Eskandari, Mohsen & Ghadi, Mojtaba Jabbari & Li, Li & Zhang, Jiangfeng & Siano, Pierluigi, 2020. "A comparative study of clustering techniques for electrical load pattern segmentation," Renewable and Sustainable Energy Reviews, Elsevier, vol. 120(C).
    4. Al-Wakeel, Ali & Wu, Jianzhong & Jenkins, Nick, 2017. "k-means based load estimation of domestic smart meter measurements," Applied Energy, Elsevier, vol. 194(C), pages 333-342.
    5. Hsu, David, 2015. "Comparison of integrated clustering methods for accurate and stable prediction of building energy consumption data," Applied Energy, Elsevier, vol. 160(C), pages 153-163.
    6. Ruhang, Xu, 2020. "Efficient clustering for aggregate loads: An unsupervised pretraining based method," Energy, Elsevier, vol. 210(C).
    7. Zhou, Kaile & Yang, Changhui & Shen, Jianxin, 2017. "Discovering residential electricity consumption patterns through smart-meter data mining: A case study from China," Utilities Policy, Elsevier, vol. 44(C), pages 73-84.
    8. Rongheng Lin & Budan Wu & Yun Su, 2018. "An Adaptive Weighted Pearson Similarity Measurement Method for Load Curve Clustering," Energies, MDPI, vol. 11(9), pages 1-17, September.
    9. Gianluca Trotta & Kirsten Gram-Hanssen & Pernille Lykke Jørgensen, 2020. "Heterogeneity of Electricity Consumption Patterns in Vulnerable Households," Energies, MDPI, vol. 13(18), pages 1-17, September.
    10. Yildiz, B. & Bilbao, J.I. & Dore, J. & Sproul, A.B., 2017. "Recent advances in the analysis of residential electricity consumption and applications of smart meter data," Applied Energy, Elsevier, vol. 208(C), pages 402-427.
    11. Russo, Marianna & Bertsch, Valentin, 2020. "A looming revolution: Implications of self-generation for the risk exposure of retailers," Energy Economics, Elsevier, vol. 92(C).
    12. Sachs, Julia & Moya, Diego & Giarola, Sara & Hawkes, Adam, 2019. "Clustered spatially and temporally resolved global heat and cooling energy demand in the residential sector," Applied Energy, Elsevier, vol. 250(C), pages 48-62.
    13. Yu, Xinran & Ergan, Semiha & Dedemen, Gokmen, 2019. "A data-driven approach to extract operational signatures of HVAC systems and analyze impact on electricity consumption," Applied Energy, Elsevier, vol. 253(C), pages 1-1.
    14. Robbert Claeys & Hakim Azaioud & Rémy Cleenwerck & Jos Knockaert & Jan Desmet, 2020. "A Novel Feature Set for Low-Voltage Consumers, Based on the Temporal Dependence of Consumption and Peak Demands," Energies, MDPI, vol. 14(1), pages 1-24, December.
    15. Guo, Bowei & Weeks, Melvyn, 2022. "Dynamic tariffs, demand response, and regulation in retail electricity markets," Energy Economics, Elsevier, vol. 106(C).
    16. Ye, Tinghan & Liu, Shanshan & Kontou, Eleftheria, 2024. "Managed residential electric vehicle charging minimizes electricity bills while meeting driver and community preferences," Transport Policy, Elsevier, vol. 149(C), pages 122-138.
    17. Alexander Tureczek & Per Sieverts Nielsen & Henrik Madsen, 2018. "Electricity Consumption Clustering Using Smart Meter Data," Energies, MDPI, vol. 11(4), pages 1-18, April.
    18. Tanoto, Yusak & Haghdadi, Navid & Bruce, Anna & MacGill, Iain, 2020. "Clustering based assessment of cost, security and environmental tradeoffs with possible future electricity generation portfolios," Applied Energy, Elsevier, vol. 270(C).
    19. Morteza Neishaboori & Alireza Arshadi Khamseh & Abolfazl Mirzazadeh & Mostafa Esmaeeli & Hamed Davari Ardakani, 2024. "Stochastic optimal pricing for retail electricity considering demand response, renewable energy sources and environmental effects," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 23(5), pages 435-451, October.
    20. Li, Kehua & Ma, Zhenjun & Robinson, Duane & Ma, Jun, 2018. "Identification of typical building daily electricity usage profiles using Gaussian mixture model-based clustering and hierarchical clustering," Applied Energy, Elsevier, vol. 231(C), pages 331-342.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:348:y:2023:i:c:s0306261923009091. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.