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Pricing
Published in James A. Momoh, Electric Power System Applications of Optimization, 2017
Pricing policies for real-time pricing are either fixed or variable. For fixed price policies, a market situation is analyzed for profit and an appropriate price is fixed amount until the situation changes, at which point they go through the process again. On the other hand, variable pricing is characterized by negotiations. Variants of variable pricing include price shading, auctions, and, due to advances in technology, real-time pricing mechanisms. A special variant of real-time pricing is online auctions. All market participants can view the price changes soon after they occur. Traditional auctions are inefficient because they require bidders to be physically present. By solving this problem, online auctions reduce the transaction costs for bidders, increase the number of bidders, and increase the average bid price. In addition to these examples of variable pricing in the short term, there are also long-term pricing practices that could be used as variable pricing.
A simulation study for residential electricity user behavior under dynamic variable pricing with demand charge
Published in IISE Transactions, 2018
On the other hand, in practice, most utility companies provide variable pricing options on a subscription basis. Time-Of-Use (TOU) rates are the most commonly used pricing structure, while other forms of variable pricing such as Critical-Peak-Pricing (CPP) and Real-Time-Pricing (RTP) are occasionally used, due to the uncertainty of a consumer's response and system impact. Under a dynamic variable pricing structure (e.g., RTP), predicting users' load consumption behavior in response to a dynamically changing price is more difficult compared with static variable pricing structures (e.g., TOU). This poses a challenge for the adoption of dynamic variable pricing schemes and associated DR programs. The current state of DR practices clearly indicates an opportunity to research dynamic variable pricing mechanisms. Of the 25 largest cities in the United States, only two of them offer RTP and six offer CPP, whereas 21 offer TOU-type programs. Therefore, it is our belief that a quantitative study of consumer behavior under dynamic variable pricing will push the envelope in advancing research on DR.