Electricity retail market model with flexible price settings and elastic price-based demand responses by consumers in distribution network

Abstract This paper presents a novel electricity retail market model in which elastic demands of consumers in a distribution network are traded at flexible selling prices offered by a retailer. The main works of this paper are in three points: (1) Flexible and divided selling price settings over one day by the retailer, (2) flexible and elastic responses corresponding to the selling prices (price-based Demand Response: DR) by different types of consumers, and (3) distribution network physical constraints to obtain the realistic cost of tariff for usage of the distribution network imposed to the retailer are formulated. Unlike previous related works, the proposed model is a new one applicable to the behavior analysis of decision makers in the deregulated environment with such flexible transactions. In the transactions, the retailer offers a selling price for a unit time period over one day and the consumers elastically respond to the prices. Assuming that the consumers respond to the prices rationally and control their demands flexibly, we model the transaction as a Stackelberg game formulated by a bi-level programming problem. The behavior of the market players is examined in computational experiments using the spot price data in Japan Electricity Power eXchange (JEPX) and distribution network models, i.e. modified IEEE 13 bus test system model and IEEE 33-bus radial distribution test system model. We employ a genetic algorithm to find an approximated solution of the formulated non-convex bi-level programming problem. The computational results show some new findings about the deregulated retail market if flexible transactions between the retailer and the consumers are realized.