An Optimal Real-Time Pricing Algorithm With Compensation Mechanism Designed For Critical Power Shortage

Real-time pricing (RTP) is the most ideal pricing mechanism in demand side management, but when in the face of short-term power shortage, its price will become extremely high. In this paper we propose an algorithm to improve the realtime pricing mechanism by offering compensation price to users who could provide adequate power consumption reduction. By utilizing the theory of Stackelberg game, we establish the optimal pricing model between the demand side and the supply side. Simulation results confirm that the proposed distributed algorithm can achieve a better performance during the power shortage.