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Optimal pricing strategy to reduce fuel consumption in electricity generation with smart meter

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Abstract

It has been widely recognized that the efficiency of a thermal power system can be improved by technological advancement of electricity generation and manipulation of electricity consumption. The smart meter enables two-way communication between the customers and the electricity generation system. The electricity generation system uses price incentive (i.e. a higher price in the peak period and a lower price in the off-peak period) to shift part of demands from peak to off-peak period under the smart grid environment. Given the fact that fuel consumption in each period is a strictly increasing convex function of power output, we propose two-period and multi-period pricing strategies, and study the effect of different pricing strategies on reducing fuel consumption.

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Author information

Authors and Affiliations

  1. School of Management, University of Science & Technology of China, Hefei, Anhui, 230026, China

    Xiaoyan Xu, Zhuang Ma & Liang Xu

  2. School of Management, Zhejiang University, Hangzhou, Zhejiang, 310058, China

    Xiaoyan Xu

  3. Department of Management Science, City University of Hong Kong, Kowloon Tong, Hong Kong SAR, China

    Ye Lu

Authors
  1. Xiaoyan Xu
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  2. Zhuang Ma
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  3. Liang Xu
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  4. Ye Lu
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Corresponding author

Correspondence to Xiaoyan Xu.

Additional information

Xiaoyan Xu received the Ph.D. degree in management science from University of Science and Technology of China (USTC) in 2006. She currently is a professor of School of Management, Zhejiang University. Her research interests include finance management and supply chain management. She has published academic paper in many journals, such as IEEE Transactions on Systems, Man, and Cybernetics, International Journal of Production Economics, Decision Support Systems.

Zhuang Ma received the Master degree in management science from Hefei University of Technology (HFUT) in 2005. He currently is studying for a doctorate in the University of Science and Technology of China (USTC). His research interests include service operations management and supply chain management.

Liang Xu received the Ph.D. degree in management science from the University of Science and Technology of China (USTC) in 2014. His research interests include service operations management and supply chain management.

Ye Lu received a Ph.D. degree in operations research from MIT in 2009, a Ph.D. degree in mathematics from the University of Notre Dame in 2006 and a Bachelor of Science degree in applied math from Tsinghua University in 2002. He currently is an assistant professor of Department of Management Sciences, City University of Hong Kong. His research interest includes supply chain management, revenue management, financial engineering and nonlinear optimization. He has published academic paper in many journals, such as Operations Research, Production and Operations Management, European Journal of Operational Research.

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Xu, X., Ma, Z., Xu, L. et al. Optimal pricing strategy to reduce fuel consumption in electricity generation with smart meter. J. Syst. Sci. Syst. Eng. 24, 81–106 (2015). https://doi.org/10.1007/s11518-015-5265-1

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  • DOI: https://doi.org/10.1007/s11518-015-5265-1

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