A Hierarchical Control Framework With a Novel Bidding Scheme for Residential Community Energy Optimization

Residential energy optimization provides economic and reliability benefits to the electric utility and consumers. Two major challenges in community energy optimization are: 1) to efficiently coordinate among a large number of residential consumers' electric appliances and 2) to ensure participating consumers are comfortable and are rewarded with financial incentives during demand reduction. This paper proposes a hierarchical control framework with a novel bidding scheme that manages the use of consumers' electric appliances while satisfying utility demand reduction requests. A new demand reduction bidding strategy is introduced for the efficient coordination among several local controllers (LCs) under a central controller (CC) in the proposed framework. Incentives are provided to the residential consumers for their participation, while considering their preferences, using a continuous reward structure. A simulation study on the 6-bus Roy Billinton test system with 1200 residential consumers demonstrates the financial benefits to the electric utility and consumers by performing a 6% demand reduction during peak times. The results show that the utility saves $28217, and a residential consumer earns $9.37 on average for a one-hour demand reduction event (e.g., reducing 1.2 MW peak power). The reward scheme designed from this framework is more economical to utilities compared to existing utility reward schemes.