A Leader-Follower Strategy for Implementing Demand Responses in Power Distribution Systems

In this paper, a new dynamic pricing scheme is proposed for demand response aggregators (DRAs) to maximize their profits. A Stackelberg game is established to model the interactions between a load serving entity (LSE) and DRAs, and a bi-level optimization formulation attained. In the upper-level problem, the energy procurement from the wholesale electricity market is determined for the LSE based on the electricity price forecast, while DRAs adjust their consumption patterns with respect to the dynamic pricing scheme. The proposed model is transformed into a mixed-integer, quadratically-constrained quadratic programming (MIQCQP) problem, and the corresponding Karush-Kuhn-Tucker (KKT) conditions are attained to represent the optimality of the lower-level problem. The complementary constraints in the KKT conditions are linearized using big-M reformulation. Finally, the effectiveness of the proposed approach is demonstrated by numerical examples.