Load adaptive pricing: An emerging tool for electric utilities

Motivated by the importance of the peak load problem faced by the electric utility industries, in this paper we analyze several different electricity pricing schemes from a game theoretic point of view. Recognizing the limit of the traditional peak load pricing formulation and the persuasive breakthroughs in microelectronic technology, we introduce a philosophy in which supply and demand respond to each other through prices and consumptions, and the utility company sells power at ´real time´ rate. We call it Load Adaptive Pricing. The Load Adaptive Pricing problem is then formulated as a closed-loop dynamic Stackelberg game, and solved for a particular Producer/Consumer model. We demonstrate that it is possible for the utility company to induce the customer to behave cooperatively to achieve the team optimum. We also show that in steady state, our solution converges and the system is stable.