On a fair distribution of consumer's flexibility between market parties with conflicting interests

Summary The present work deals with social welfare maximization for energy scheduling. The parties involved in this study are a utility company, a distribution system operator and residential end‐users. It allows the different participants to share a common electrical grid, without violating network constraints. A smart grid, equipped with a two‐way communication system on a district level, is considered. For this purpose, each participant exchanges information, in order to establish a power consumption schedule that optimizes its own objectives, within the grid constraints. This strategy is illustrated on a district level to avoid overloading the distribution network. The consumption profiles of end‐users consist of background consumption; some end‐users are equipped with a heat pump and/or an electric vehicle, each of which is capable of responding to price variations. The impact of several tariff structures on the stability of the grid is explored. First of all, flat and day/night tariff structures are considered, and it is shown that price variation provokes load synchronization and leads to network overloads. Next, a real‐time pricing tariff structure is used. If each end‐user optimizes its behaviour to minimize personal costs, the grid is unable to supply all power during peak moments. In conclusion, if power constraints are imposed, the same grid can be stabilized, even if power demands increase by a factor of three or four. In a final example, the impact of imbalance costs is examined. The cluster can be guided to maximize profits for the utility company from the imbalance mechanism. Copyright © 2016 John Wiley & Sons, Ltd.