A Stackelberg Game-Theoretic Model of Fee-and-Rebate Pricing in a Load-Reduction Emergency Demand Response Program

In recent years, some policies that are intended to reduce power usage at peak times have been offering rebates as an incentive to conserve power when the operating reserve is below the standard value. In many countries, the process is not fully implemented exclusively by the power suppliers or by the power consumers. Instead, it is achieved by a collaborative model that assesses the values of different consumers and awards rebates or other allowances accordingly. Since the manufacturing companies, a foremost consumer of total power in many countries, do not want to compromise on their productivity, it is reasonable for the power supplier to follow an efficient and competitive model, one that eliminates the possibility of failing in the effort to reduce power consumption and does not unduly sacrifice profits by paying an excessive rebate to customers. Here, the current limitations of an emergency demand response program (EDRP) are addressed via a Stackelberg game-theoretic model, and the achievements and benefits gained through use of such a model are illustrated in a case study based on data from the Taiwan Power Company (TPC).