Individual and cluster demand response in retail electricity trading with end-users in differentiated oligopoly market: A game-theoretical approach

Abstract

The characterization of the competitive interdependence among power consumers in power trading system contributes to pursuing efficient power supply and suppressing peak–valley load differences. Even though Stackelberg–Nash game approach has been applied to retail electricity trading with a single utility company and a group of end-users under competitive interdependence, the extension to multi-cluster retail electricity markets is not focused yet and the best strategies of end-users are still decoupled to each other. To bridge this gap this paper investigates the price-based demand response problem in multi-cluster retail electricity markets to coordinate the energy consumption behavior of the end-users and the retail price behavior of the utility companies. Adopting the structure of hierarchical game theory, the cluster retail price is controlled by the utility company to affect the energy consumption demand of end-users within the corresponding cluster and hence increase the income of both the utility companies and the end-users. In order to describe the coupled competition relationship among the bottom end-users in the system, the Cournot competition model of the differentiated oligopoly market is constructed by taking energy consumption as the individual strategy of end-users. The existence and uniqueness of Nash equilibrium and Stackelberg Nash equilibrium in such a hierarchical game system are proved, and a seeking algorithm is proposed to seek the Stackelberg Nash equilibrium, which is regarded as the extension from the existing algorithm for multi-cluster setup. This work gives an insight to theoretically check whether the utility companies need to redesign the contract with the power generator to ask for larger maximum supply.