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Investigating the impact of demand flexibility on electricity retailers

Previous work has demonstrated the significant benefits of demand flexibility for low-carbon electricity systems. However, given the deregulation of the electricity industry, this flexibility also affects the business case of retailers, an aspect which has not yet been thoroughly investigated. This paper proposes a new multi-period bi level optimization model capturing the interactions between a retailer’s offered tariffs to the served consumers, the consumers’ flexibility and the wholesale market in an integrated fashion. This bi-level problem is efficiently solved after converting it to a Mathematical Program with Equilibrium Constraints (MPEC), and subsequently to a Mixed-Integer Linear Problem (MILP). Casestudies demonstrate that the time-shifting flexibility of the consumers reduces the retailer’s revenue, since consumers can respond more effectively to strategic retail pricing patterns, but also reduces the retailer’s cost, since it leads to flatter wholesale demand and price profiles, an effect which is not captured by previous work. Finally, the results indicate that the impact of this flexibility on the retailer’s business case depends on the level of competition with other retailers in the market.

Author(s):

Dawei Qiu    
Imperial College London
United Kingdom

Dimitrios Papadaskalopoulos    
Imperial College London
United Kingdom

Yujian Ye    
Imperial College London
United Kingdom

Goran Strbac    
Imperial College London
United Kingdom

 

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