Optimal demand response using mechanism design in the smart grid

Demand side management is considered to be a key component in the future smart grid that can help to achieve an efficient utilization of energy. In this paper we consider a residential power network, where consumers are asked to report their information about power usage to service provider, then the provider determines the optimal power allocations and charges for each user based on social welfare maximization. The benefit of each user is related to demand for electricity and the quantity of power allocated. Assuming consumers are strategic and selfish, we proposed an efficient pricing algorithm with which consumers cannot achieve greater benefit by mis-reporting and social welfare maximization can be achieved. Finally we present simulation results to show that our proposed method can benefit both of the service provider and consumers.