Stackelberg–Nash game approach for price-based demand response in retail electricity trading

This paper studies the price-based demand response problem in a deregulated retail electricity trading, aiming to coordinate the energy consumption behavior of end-users under dynamic retail prices. The challenge here is that in addition to the hierarchical decision-making process between utility company and end-users considered in existing works, the non-cooperative and competitive interdependence among end-users cannot be ignored. To address this issue, we first construct a novel Stackelberg–Nash game, in which the Stackelberg game is used to capture the hierarchical decision-making process between utility company and end-users, while the Nash game is dedicated to describing the interdependence among end-users. Then the existence and uniqueness of the Stackelberg–Nash equilibrium is provided along with theoretical analysis. On the basis of the analysis of equilibrium, we propose a distributed iterative algorithm with an adaptive step size, which is benchmarked with a fixed step-size algorithm. The comparison results on a real-life residential retail electricity market show that our proposed algorithm has better performance in terms of effectiveness and scalability.