Feasibility of using discriminate pricing schemes for energy trading in smart grid

Wayes Tushar, Chau Yuen, Bo Chai, David B. Smith, H. Vincent Poor

Research output: Chapter in Book/Report/Conference proceedingConference contribution

15 Scopus citations


This paper investigates the feasibility of using a discriminate pricing scheme to offset the inconvenience that is experienced by an energy user (EU) in trading its energy with an energy controller in smart grid. The main objective is to encourage EUs with small distributed energy resources (DERs), or with high sensitivity to their inconvenience, to take part in the energy trading via providing incentive to them with relatively higher payment at the same time as reducing the total cost to the energy controller. The proposed scheme is modeled through a two-stage Stackelberg game that describes the energy trading between a shared facility authority (SFA) and EUs in a smart community. A suitable cost function is proposed for the SFA to leverage the generation of discriminate pricing according to the inconvenience experienced by each EU. It is shown that the game has a unique sub-game perfect equilibrium (SPE), under the certain condition at which the SFA's total cost is minimized, and that each EU receives its best utility according to its associated inconvenience for the given price. A backward induction technique is used to derive a closed form expression for the price function at SPE, and thus the dependency of price on an EU's different decision parameters is explained for the studied system. Numerical examples are provided to show the beneficial properties of the proposed scheme.

Original languageEnglish (US)
Title of host publication2014 IEEE Global Communications Conference, GLOBECOM 2014
PublisherInstitute of Electrical and Electronics Engineers Inc.
Number of pages7
ISBN (Electronic)9781479935116
StatePublished - Feb 9 2014
Event2014 IEEE Global Communications Conference, GLOBECOM 2014 - Austin, United States
Duration: Dec 8 2014Dec 12 2014

Publication series

Name2014 IEEE Global Communications Conference, GLOBECOM 2014


Other2014 IEEE Global Communications Conference, GLOBECOM 2014
Country/TerritoryUnited States

All Science Journal Classification (ASJC) codes

  • Electrical and Electronic Engineering
  • Computer Networks and Communications
  • Communication


  • Smart grid
  • discriminate pricing
  • distributed energy resources
  • energy management
  • game theory


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