Time-of-use electricity pricing based on global optimization for generation expansion planning

This paper introduces a time-of-use electricity pricing approach which can be used to provide consumers more options for their choices on electricity tariffs associated with their electricity supply reliability levels. This approach is based on a global optimization model for generation expansion planning which combines a least-cost generation expansion planning model, a consumer-differentiated reliability model for responsiveness to consumer needs, and consumer-differentiated, price-elasticity modelling for anticipating demand of all consumers. It is found that the off-peak prices of all consumer segments are approximately in proportion to their willingness-to-pay, but the peak prices are relevant to their willingness-to-pay ratios as well as their willingness-to-pay.