Time-of-Use Pricing in the Electricity Market: An Application of Stackelberg Game

Electrical power, generated and consumed, is perhaps, one of today’s most important construct in determining the progress of a people. The power mismatch between the generated and consumed power is one of the major issues faced in the electricity industry. This can be addressed by analysing user behaviour and manipulating it. This paper attempts to put forth a demand response (DR) technique using the concept of Time-of-Use (ToU) electricity pricing. The utilities have an upper hand of quoting the electricity price whereas the users must follow this price and give their best response of power consumption. This process is similar to a leader-follower setting as in a Stackelberg game where the follower acts according to the leader’s strategy and gives its best response in every situation. This paper proposes a pricing technique where the users are charged according to the amount of power consumed in the specific period of time.