Peer effect-based demand response in smart grid: a game theoretical approach

In social and economic fields, the peer effect and its influence gradually attract public attention. In this paper, we explore the interactions between a load-serving entity and a group of households in a smart grid community and put forward a peer effect-based demand response (PEDR) scheme applying dynamic pricing. A two-stage Stackelberg game based framework is established in which the electricity price and consumption decisions are derived adopting backward induction. We obtain the closed-form solution of the game (i.e., the equilibrium) in each stage and prove its existence and uniqueness. Simulation results indicate that the PEDR scheme shows superiority in energy consumption and peak to average ratio (PAR) compared with the baseline scheme without considering peer effects. Additionally, we study the impacts of social network structure of users and show that by setting the central node to be a frugal consumer in star topology structure, the performance of PEDR can be further improved. Such evaluations, as we believe, shall provide useful insights for energy providers to devise rational demand response policies.