Smart energy pricing for demand‐side management in renewable energy smart grids

Smart grids are expected to provide various benefits to society by integrating advances in power engineering with recent developments in the field of information and communications technology. One of the advantages is the support to efficient demand‐side management (DSM), for example, changes in consumer demands for energy based on using incentives. Indeed, DSM is expected to help grid operators balance time‐varying generation by wind and solar units, and the optimization of their usage. This paper focuses on DSM considering renewable energy generation and proposes an auction, in which consumers submit bids to renewable energy usage plans. An additional model is introduced to allow consumers to compute their bid for a given usage plan. Both models have been extended to include energy storage devices. The proposed model is compared to a system with time‐varying pricing for energy, where it is shown to allow consumers to use more appliances, to lead to a larger profit, and to reduce the peak‐to‐average ratio of energy consumption. Finally, the impact of the use of energy storage in households and in the energy provider is also considered.