Optimal design of reward-penalty demand response programs in smart power grids

In smart and sustainable power grids, incentive-based demand response programs (DRPs) encourage customers to shift their demand from peak load periods. Broad participation of customers in these programs may lead to a peak rebound and the distribution system congestion in lower load periods, endangering the supply of reliable and sustainable electricity to urban consumers. To tackle these issues, this paper proposes a reward-penalty DRP for customers in smart distribution networks. In the proposed program, the customers receive rewards as they reduce or shift their demands in requested hours. The customers may also be penalized if their demands exceed predefined thresholds. An optimization problem is proposed to determine the optimal penalty and reward values. The objective function is to maximize the distribution company's profit, considering operational constraints of the distribution system. The proposed program is examined on a test system, and the results are compared with the broad application of conventional incentive-based DRPs. The results indicate that the proposed reward-penalty DRP can improve the network operational characteristics and mitigate the peak rebound, without imposing more costs on customers.