Optimal Demand Contracting Strategy Under Uncertainty and Its Implication for Advanced Pricing

Based on the current practice of charging peak demand, an expectation-oriented stochastic model is established for the demand contracting decision of electricity users. The resultant optimization problem is proved to be nonlinear but convex. Thus, the first-order optimality condition of the proposed model, which leads to an integral equation founded on the probability density function of the peak load, is used to derive the optimal contracting strategy for consumers. Simulation results support the convexity of the proposed model and the effectiveness of the proposed solution method under different demand charging rules and different consumption patterns of customers.