A day-ahead electricity pricing model based on smart metering and demand-side management

Several factors support more deployment of real-time pricing (RTP); including recent developments in area of smart metering, regulators interest in promoting demand response programs and well-organized electricity markets. This paper first reviews time-based electricity pricing and the main barriers and issues to fully unleash benefits of RTP programs. Then, a day-ahead real-time pricing (DA-RTP) model proposed, which addresses some of these issues. The proposed model can assist a retail energy and/or a distribution company (DISCO) to offer optimal DA hourly prices using smart metering. The time prices are determined through an optimization problem which seeks to maximize the electricity provider's profit, while considering consumers' benefit, minimum daily energy consumption, consumer response to posted electricity prices, and distribution network constraints. The numerical results associated with Ontario electricity tariffs indicate that instead of directly posting DA market prices to consumers, it would be better to calculate optimal prices which would yield higher benefit both for the energy provider and consumers. (C) 2012 Elsevier Ltd. All rights reserved.