Optimal Targeting and Contract Offering for Load Curtailment in Nega-Watt Markets

This paper models and analyzes Nega-Watt markets. In the proposed setting, a utility operator wants to curtail some amount of demanded load during peak hours in order to save energy generation costs. The problem for the operator is twofold: 1) select the consumers, and 2) determine the amounts of load to be curtailed by each one of them. The major novelty in this setup stems from the arising uncertainty due to consumer nonengagement. Even if an a priori agreement is reached between the operator and a consumer about the load to be curtailed, the consumer may not succeed to curtail the load. The second element that makes our problem formulation different from other markets is the incentive design per se. We argue that the operator needs to employ a two-branch incentive, that is, provide consumers with a reward if they actually curtail the load and charge them a fine if they do not. We employ this dual-mode incentive into various game-theoretic market mechanisms, such as bilateral negotiation and different types of Stackelberg mechanisms that result in selecting the consumers and the amounts of load to curtail. We define equilibrium points for the mechanisms and compute the resulting contractual agreements between the operator and each selected consumer for load curtailment. Our results reveal interesting insights about the impact of the competition arising among consumers and the consumer-operator interaction on the expected benefits for the operator and the consumers.