A bi-level model for the design of dynamic electricity tariffs with demand-side flexibility

This paper addresses the electricity pricing problem with demand-side flexibility. The interaction between an aggregator and the prosumers within a coalition is modeled by a Stackelberg game and formulated as a mathematical bi-level program where the aggregator and the prosumer, respectively, play the role of upper and lower decision makers with conflicting goals. The aggregator establishes the pricing scheme by optimizing the supply strategy with the aim of maximizing the profit, prosumers react to the price signals by scheduling the flexible loads and managing the home energy system to minimize the electricity bill. The problem is solved by a heuristic approach which exploits the specific model structure. Some numerical experiments have been carried out on a real test case. The results provide the stakeholders with informative managerial insights underlining the prominent roles of aggregator and prosumers.