Optimal design of retailer-prosumer electricity tariffs using bilevel optimization

We compare various flexible tariffs that have been proposed to cost-effectively govern a prosumer's electricity management-in particular time-of-use (TOU), critical-peak-pricing (CPP), and a real-time-pricing tariff (RTP). As the outside option, we consider a fixed-price tariff (FP) that restricts the specific characteristics of TOU, CPP, and RTP, so that the flexible tariffs are at least as profitable for the prosumer as the FP tariff. We propose bilevel models to determine the optimal interplay between the retailer's tariff design and the prosumer's decisions on using the storage, on consumption, and on electricity purchases from as well as electricity sales to the grid. The single-level reformulations of the considered bilevel models are computationally highly challenging optimization problems since they combine bilinearities and mixedinteger aspects for modeling certain tariff structures. Based on a computational study using real-world data, we find that RTP increases retailer profits, however, leads to the largest price volatility for the prosumer. TOU and CPP only yield mild additional retailer profits and, due to the multiplicity of optimal plans on the part of the prosumer, imply uncertain revenues for the retailer. (c) 2020 Elsevier Ltd. All rights reserved.

Automated summary

The study compares various flexible tariffs for prosumers' electricity management, finding that real-time pricing tariff increases retailer profits but leads to the largest price volatility for prosumers, while time-of-use and critical-peak-pricing tariffs only yield mild additional profits for retailers and uncertain revenues due to the multiplicity of optimal plans from prosumers.