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Designing a Profit-Maximizing Critical Peak Pricing Scheme Considering the Payback Phenomenon

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  • Sung Chan Park

    (Department of Electrical Engineering and Computer Science, Seoul National University, Daehak-dong, Gwanak-gu, Seoul 151-742, Korea)

  • Young Gyu Jin

    (Center for Advanced Power & Environmental Technology (APET), the University of Tokyo, 7-3-1 Hongo, Bunkyo-ku, Tokyo 113-8656, Japan)

  • Yong Tae Yoon

    (Department of Electrical Engineering and Computer Science, Seoul National University, Daehak-dong, Gwanak-gu, Seoul 151-742, Korea)

Abstract

Critical peak pricing (CPP) is a demand response program that can be used to maximize profits for a load serving entity in a deregulated market environment. Like other such programs, however, CPP is not free from the payback phenomenon: a rise in consumption after a critical event. This payback has a negative effect on profits and thus must be appropriately considered when designing a CPP scheme. However, few studies have examined CPP scheme design considering payback. This study thus characterizes payback using three parameters (duration, amount, and pattern) and examines payback effects on the optimal schedule of critical events and on the optimal peak rate for two specific payback patterns. This analysis is verified through numerical simulations. The results demonstrate the need to properly consider payback parameters when designing a profit-maximizing CPP scheme.

Suggested Citation

  • Sung Chan Park & Young Gyu Jin & Yong Tae Yoon, 2015. "Designing a Profit-Maximizing Critical Peak Pricing Scheme Considering the Payback Phenomenon," Energies, MDPI, vol. 8(10), pages 1-17, October.
    • Handle: RePEc:gam:jeners:v:8:y:2015:i:10:p:11363-11379:d:57018
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    References listed on IDEAS

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