A data-driven methodology for dynamic pricing and demand response in electric power networks

The practice of disclosing price of electricity before consumption (dynamic pricing) is essential to promote aggregator-based demand response in smart and connected communities. However, both practitioners and researchers have expressed fear that wild fluctuations in demand response resulting from dynamic pricing may adversely affect the stability of both the network and the market. This paper presents a comprehensive methodology guided by a data-driven learning model to develop stable and coordinated strategies for both dynamic pricing as well as demand response. The methodology is designed to learn offline without interfering with network operations. Application of the methodology is demonstrated using simulation results from a sample 5 bus PJM network. Results show that it is possible to arrive at stable dynamic pricing and demand response strategies that can reduce cost to the consumers as well as improve network load balance.