Equilibria in an Oligopolistic Electricity Retail Market with Price-based Demand Responses

Abstract

In an electric power system with modern smart technologies on the demand side such as smart meters and home energy management systems, electric power is utilized efficiently by a price-based demand response to selling prices provided by electricity retailers. For realizing the smart power system, competition among the retailers under a deregulated electricity market plays an important role. In this paper, the equilibria reached by selfish electricity retailers and consumers with the price-based demand response in a competitive electricity retail market are studied based on non-cooperative game theory. The rational behavior of each retailer considering the best response of each consumer is modeled by a mathematical program with equilibrium constraints (MPEC). An equilibrium problem with equilibrium constraints (EPEC) is formulated by using the MPECs of all the retailers. The equilibria are efficiently identified by solving a mixed-integer linear programming problem, that is converted from the non-convex EPEC including complementarity conditions. Among the alternative equilibria in simple case studies, we analyze meaningful equilibria that provide us with knowledge on an oligopolistic electricity retail market with the demand responses.