A pricing scheme for electric utility's participation in day-ahead and real-time flexibility energy markets

Liberalized electricity markets, smart grids and high penetration of renewable energy sources (RESs) led to the development of novel markets, whose objective is the harmonization between production and demand, usually noted as real time of flexibility markets. This necessitates the development of novel pricing schemes able to allow energy service providers (ESPs) to maximize their aggregated profits from the traditional markets (trading between wholesale/day-ahead and retail markets) and the innovative flexibility markets. In the same time, ESPs have to offer their end users (consumers) competitive (low cost) energy services. In this context, novel pricing schemes must act, among others, as automated demand side management (DSM) techniques that are able to trigger the desired behavioral changes according to the flexibility market prices in energy consumption curves (ECCs) of the consumers. Energy pricing schemes proposed so far, e.g. real-time pricing, interact in an efficient way with wholesale market. But they do not provide strong enough financial incentives to consumers to modify their energy consumption habits towards energy cost curtailment. Thus, they do not interact efficiently with flexibility markets. Therefore, we develop a flexibility real-time pricing (FRTP) scheme, which offers a dynamically adjustable level of financial incentives to participating users by fairly rewarding the ones that make desirable behavioral changes in their ECCs. Performance evaluation results demonstrate that the proposed FRTP is able to offer a 15%–30% more attractive trade-off between the stacked profits of ESPs, i.e. the sum of the profits from retail and flexibility markets, and the satisfaction of the consumers.