Day-ahead Retail Pricing considering Demand Response and Distributed Generation

With the increase of distributed generation (DG) and demand response (DR) resources connecting to the power system, the positive integration and effective management of DGs and DRs will bring new profit space for the retailer. Combined with the process of China's electricity market reform, reasonable assumptions are made on the new market mechanism and the retailer's operation model. Based on the idea of bi-level optimization, the paper proposes the day-ahead retail pricing model with the retailer's profit maximization as the upper-level goal and the consumers' cost minimization as the lower-level goals. The method of decentralized decision making is adopted to solve the model with the group search algorithm and active set algorithm. Furthermore, the validity of the model is proved by a simulation example.