Dynamic Pricing Mechanism in Smart Grid Communications is Shaping Up

An efficient smart grid communication system is a key enabling technology for modernized utility that can adjust electricity usage to balance generation and demand in real time. However, the utility industry is not able to meet the power demand for the wholesale market during overloading or emergency situations. To mitigate power shortage pressures, utility providers need to employ a dynamic pricing policy to enforce higher pricing than pre-estimated statistic pricing to motivate consumers to reduce their power consumption. In this letter, the time of use (TOU) approach is proposed to regulate price variances considering desired power demand. In this mechanism, the consumers
deliver their TOU electricity demands and subsequent control signals to utility providers through communication network infrastructure. The utility provider creates an hourly demand profile for each consumer by predicating individual requests over short- and long-time frames. The control signaling exchanged
and prior arrangement of services enable utility providers to evaluate the status of wholesale market demand and assign prices considering dynamic changes in electricity demand. Numerical analysis study was carried out to validate the advantages of the proposed mechanism.