A Consumer Dissatisfaction Model Linking Dynamic Pricing With Shifted Product-Use in Residential Electricity Markets

Abstract

Demand Response (DR) is the implementation of a specific strategy or set of strategies, with the goal of altering consumer energy demand, such that some system level objectives are improved. These strategies typically include dynamic pricing, direct load control, policy implementation, or other financial incentives. DR will become a crucial tool for managing growing global energy demand in conjunction with higher penetration rates of intermittent renewable energy resources. Effective implementation of a DR strategy requires a realistic understanding of how consumers will respond to that strategy and how they will be affected by it. Here, a product-based decision model for residential consumers, that links consumer decisions directly to product-use, is revisited and adapted from a continuous time formulation to discrete time. The relationship between financial incentives, consumer preferences, and demand flexibility at the population level is then quantified. The model is used for exploring the tradeoffs between typical objectives for a dynamic pricing residential DR program and evaluating the characteristics of well-performing pricing solutions.