A Comparison of Priority Service versus Real-Time Pricing for Enabling Residential Demand Response

The unprecedented growth of renewable energy has led to various challenges in power system operations. Demand response can provide additional flexibility to the system in order to balance the effects of the massive integration of renewable resources. This paper focuses on the comparison of two approaches for enabling demand response, real-time pricing and priority service pricing. This analysis is centered on the impact to consumers by assessing the effects of these schemes on their comfort and bill. We use a simple example of a single household with one appliance. The example provides an end-to-end illustration of (i) how to design a priority service menu from a time series of real-time prices, (ii) how a household selects options from this menu, (iii) how devices in the household are dispatched by a home energy router, and (iv) what consumer welfare losses are relative to the golden standard of real-time pricing.