Time-of-use pricing in retail electricity market: Step tariff vs. usage-based schemes

With the advances of Advanced Metering Infrastructure (AMI), it is possible for power customer and utility company to adjust their consumption behaviors or schemes in order to achieve higher profits in retail electricity market. Recently, relevant research emerges from demand side management (DSM) view. Time dependent pricing has been proposed as a DSM method to influence user demands. Initial investigations have shown its advantages over the conventional time independent pricing. Nevertheless, much is unknown in how a practical and effective time dependent pricing scheme can be designed. In this paper, we combine game-theoretic approach and probabilistic analysis methods to explore the design space of time dependent pricing. In particularly, we focus on usage-based and step tariff schemes. Our findings include: step tariff scheme improves capacity utilization during high demand period and can earn higher users' surplus than that in usage-based scheme all the time.