Open AccessInvestigating the effects of demand flexibility on electricity retailers’ business through a tri‐level optimisation model
Author(s) -
Qiu Dawei,
Papadaskalopoulos Dimitrios,
Ye Yujian,
Strbac Goran
Publication year - 2020
Publication title -
iet generation, transmission and distribution
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.92
H-Index - 110
eISSN - 1751-8695
pISSN - 1751-8687
DOI - 10.1049/iet-gtd.2019.1433
Subject(s) - flexibility (engineering) , profit (economics) , market clearing , industrial organization , revenue , wholesale market , demand response , microeconomics , electricity market , electricity , business , scope (computer science) , economics , computer science , programming language , accounting , management , electrical engineering , engineering
The investigation of the effects of demand flexibility on the pricing strategies and the profits of electricity retailers has recently emerged as a highly interesting research area. However, the state‐of‐the‐art, bi‐level optimisation modelling approach makes the unrealistic assumption that retailers treat wholesale market prices as exogenous, fixed parameters. This study proposes a tri‐level optimisation model, which drops this assumption and represents the wholesale market clearing process endogenously, thus capturing the realistic implications of a retailer's pricing strategies and the resulting demand response on the wholesale market prices. The scope of the examined case studies is three‐fold. First of all, they demonstrate the interactions between the retailer, the flexible consumers and the wholesale market and analyse the fundamental effects of the consumers’ time‐shifting flexibility on the retailer's revenue from the consumers, its cost in the wholesale market and its overall profit. Furthermore, they analyse how these effects of demand flexibility depend on the retailer's relative size in the market and the strictness of the regulatory framework. Finally, they highlight the added value of the proposed tri‐level model by comparing its outcomes against the state‐of‐the‐art bi‐level modelling approach.