A stochastic MPEC approach for grid tariff design with demand-side flexibility
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A stochastic MPEC approach for grid tariff design with demand‑side flexibility Magnus Askeland1,2 · Thorsten Burandt3,4,5 · Steven A. Gabriel5,6 Received: 24 February 2020 / Accepted: 15 September 2020 © The Author(s) 2020
Abstract As the end-users increasingly can provide flexibility to the power system, it is important to consider how this flexibility can be activated as a resource for the grid. Electricity network tariffs is one option that can be used to activate this flexibility. Therefore, by designing efficient grid tariffs, it might be possible to reduce the total costs in the power system by incentivizing a change in consumption patterns. This paper provides a methodology for optimal grid tariff design under decentralized decision-making and uncertainty in demand, power prices, and renewable generation. A bilevel model is formulated to adequately describe the interaction between the end-users and a distribution system operator. In addition, a centralized decisionmaking model is provided for benchmarking purposes. The bilevel model is reformulated as a mixed-integer linear problem solvable by branch-and-cut techniques. Results based on both deterministic and stochastic settings are presented and discussed. The findings suggest how electricity grid tariffs should be designed to provide an efficient price signal for reducing aggregate network peaks. Keywords Bilevel problem · Grid tariffs · Mathematical program with equilibrium constraints (MPEC) · Uncertainty
* Magnus Askeland [email protected] 1
Energy Systems, SINTEF Energy Research, Trondheim, Norway
2
Department of Electric Power Engineering, Norwegian University of Science and Technology, Trondheim, Norway
3
Workgroup for Infrastructure Policy, Technical University of Berlin, Berlin, Germany
4
The Energy, Transportation, Environment Department, German Institute for Economic Research (DIW Berlin), Berlin, Germany
5
Department of Industrial Economics and Technology Management, Norwegian University of Science and Technology, Trondheim, Norway
6
Department of Mechanical Engineering Applied Math and Statistics, Scientific Computation Program, University of Maryland, College Park, MD, USA
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1 Introduction 1.1 Background The transition from traditional, inelastic, electricity demand to more flexible consumers, means that the paradigm of demand as a passive load is no longer valid since demand can react to price signals. By introducing prosumers, who can both consume and produce electricity, the grid tariffs should provide efficient price signals to align the optimal end-user decisions with efficient utilization of the power system at a larger scale to avoid a sub-optimal outcome as demonstrated in [1]. Grid tariffs are mostly implemented as fixed amounts (€/consumer), volumetric charges (€/kWh), and possibly capacity-based (€/kW) charges. Although variations exist, electricity network tariffs can generally be reduced to these three fundamental structures [2]. A general issue regarding net
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