Electricity Demand Shaping via Randomized Rewards : A Mean Field Game Approach

In this paper, we develop a novel mechanism for reducing volatility of residential demand for electricity. We construct a reward-based (rebate) mechanism that provides consumers with incentives to shift their demand to off-peak time. In contrast to most other mechanisms proposed in the literature, the key feature of our mechanism is its modest requirements on user preferences, i.e., it does not require information of user responsiveness about shifting their de mand from the peak to off-peak time. Specifically, our mechanism utilizes a probabilistic reward structure for users who shift their demand to the off-peak time, and is robust to incomplet e information about user demand and/or risk preferences. We approach the problem from the public good perspective, and demonstrate that the mechanism can be implemented via lottery-like schemes. Our mechanism permits to reduce the distribution losses, and thus improve efficiency of electri city distribution. Finally, the mechanism can be readily incorporated into the emerging demand response schemes (e.g., the time-o fday pricing, and critical peak pricing schemes), and has sec urity and privacy-preserving properties.