Feasibility of Using Discriminate Pricing Schemes for Energy Trading in\n Smart Grid

This paper investigates the feasibility of using a discriminate pricing\nscheme to offset the inconvenience that is experienced by an energy user (EU)\nin trading its energy with an energy controller in smart grid. The main\nobjective is to encourage EUs with small distributed energy resources (DERs),\nor with high sensitivity to their inconvenience, to take part in the energy\ntrading via providing incentive to them with relatively higher payment at the\nsame time as reducing the total cost to the energy controller. The proposed\nscheme is modeled through a two-stage Stackelberg game that describes the\nenergy trading between a shared facility authority (SFA) and EUs in a smart\ncommunity. A suitable cost function is proposed for the SFA to leverage the\ngeneration of discriminate pricing according to the inconvenience experienced\nby each EU. It is shown that the game has a unique sub-game perfect equilibrium\n(SPE), under the certain condition at which the SFA's total cost is minimized,\nand that each EU receives its best utility according to its associated\ninconvenience for the given price. A backward induction technique is used to\nderive a closed form expression for the price function at SPE, and thus the\ndependency of price on an EU's different decision parameters is explained for\nthe studied system. Numerical examples are provided to show the beneficial\nproperties of the proposed scheme.\n