Designing a Profit-Maximizing Critical Peak Pricing Scheme Considering the Payback Phenomenon

Critical peak pricing (CPP) is a demand response program that can be used to maximize profits for a load serving entity in a deregulated market environment. Like other such programs, however, CPP is not free from the payback phenomenon: a rise in consumption after a critical event. This payback has...

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Bibliographic Details
Published in:Energies (Basel) 2015-10, Vol.8 (10), p.11363-11379
Main Authors: Park, Sung Chan, Jin, Young Gyu, Yoon, Yong Tae
Format: Article
Language:English
Subjects:
Computer simulation
Consumption
critical event scheduling
critical peak pricing
Deregulation
Design engineering
Electric rates
Electricity
Integer programming
load recovery
load serving entity
Markets
Mathematical models
optimal peak rate
Optimization
payback phenomenon
Prices
Pricing
Profits
Scheduling
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Summary:Critical peak pricing (CPP) is a demand response program that can be used to maximize profits for a load serving entity in a deregulated market environment. Like other such programs, however, CPP is not free from the payback phenomenon: a rise in consumption after a critical event. This payback has a negative effect on profits and thus must be appropriately considered when designing a CPP scheme. However, few studies have examined CPP scheme design considering payback. This study thus characterizes payback using three parameters (duration, amount, and pattern) and examines payback effects on the optimal schedule of critical events and on the optimal peak rate for two specific payback patterns. This analysis is verified through numerical simulations. The results demonstrate the need to properly consider payback parameters when designing a profit-maximizing CPP scheme.
ISSN:1996-1073
1996-1073
DOI:10.3390/en81011363