Transactive Pricing Schemes for Smart Grid Demand Management
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Solution Overview
Problem
Current power grid management systems face challenges in effectively controlling demand and reducing price volatility in smart grid environments, particularly in transactive markets, where utility companies struggle to directly manage consumer demand and supply limits.
Innovation Solution
The implementation of a market-based resource allocation system that uses price information from electricity futures markets to compute bid values for purchasing electricity, considering user preferences and tolerance levels, and adjusts resource allocation based on real-time demand and supply dynamics.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If transactive markets are used to control demand, then consumer demand can be managed interactively, but the utility cannot directly and completely control demand
Solution Approach 1:
The system implements feedback mechanisms where consumers receive price signals from the transactive market and adjust their demand accordingly. The utility receives feedback on consumer responses and modifies pricing strategies to achieve desired demand control objectives while maintaining market-based interaction.
Solution Approach 2:
The patent introduces intermediate control mechanisms such as demand response programs and pricing schemes that mediate between the utility and consumers. These intermediaries enable indirect demand control through economic incentives rather than direct command-and-control approaches.
2Ease of operation
If active markets are used to allow customer response to wholesale cost fluctuations, then price signals control demand, but supply limits cannot be directly enforced
Solution Approach 1:
The system incorporates feedback loops where supply limit violations or constraints are communicated back to the market participants through price adjustments and signal modifications, enabling automatic response while maintaining market dynamics.
Solution Approach 2:
The patent implements preliminary measures such as advance notice of supply constraints and pre-established pricing mechanisms that prevent supply limit violations before they occur, rather than reacting after violations happen.
3Productivity
If real-time market pricing is used, then demand management efficiency improves, but price volatility increases
Solution Approach 1:
The system implements preliminary pricing actions such as advance purchase contracts, forward-looking price signals, and pre-established pricing frameworks that stabilize future prices while maintaining real-time market responsiveness through layered pricing structures.
Solution Approach 2:
The patent introduces cushioning mechanisms such as price caps, floor prices, and buffer stocks that prevent extreme price volatility while allowing real-time market efficiency to operate within controlled parameters.
Data Source
AI summary
Disclosed herein are representative embodiments of methods, apparatus, and systems for distributing a resource (such as electricity) using a resource allocation system. One of the disclosed embodiments is a method for generating a bid value for purchasing electricity in a market-based resource allocation system. In this embodiment, a desired performance value indicative of a user's desired performance level for an electrical device is received. Price information from an electricity futures market is received. A bid value for purchasing electricity from a local resource allocation market sufficient to operate the electrical device at the desired performance level is computed. In this embodiment, the computing is performed based at least in part on the desired performance value and based at least in part on the price information from the electricity futures market.