Dynamic pricing for responsive demand to increase distribution network efficiency

Abstract

This paper designs a novel dynamic tariff scheme for demand response by considering networks costs through balancing the trade-off between network investment costs and operation costs. The target is to actively engage customers into network planning and operation for reducing network costs and finally their electricity bills. System operation costs are quantified according to generation or load curtailment by assessing their contribution to network congestion. Plus, network investment cost is quantified through examining the needed investment for resolving system congestion. Customers located at various might be facing the same energy signals but they are differentiated by network cost signals. Once customers conduct demand response during system congestion periods, the smaller savings from investment and operation cost are considered as economic singles for rewarding the response. The innovation is that it translates network operation/investment costs into tariffs, where current research is mainly focused on linking customer response to energy prices. Typical UK distribution networks are utilised to illustrate the new approach and results show that the economic signals can effectively benefit end customers for reducing system operation costs and deferring needed network investment.

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