Energy Customer 2.0: Modeling and Decision-Making guided by Smart Software Agents
01 / 2011 - 01 / 2015
A number of factors are converging to fundamentally change the structure of energy markets, including the increasing prices and environmental degradation associated with fossil fuels and nuclear energy, the increasing availability of renewable energy sources such as wind and solar, and the expected transition to electric vehicles. One response to these pressures is the transition from regulated monopolies to liberalized markets in the electricity sector, but the 2000-2001 crisis in the California energy market [14, 12] shows what can go wrong when poorly designed markets are introduced without adequate analysis. Another is the various smart grid initiatives , including smart meters that can support dynamic pricing, and demand-side management technology that can remotely manage loads in individual households and businesses. Market liberalization at both wholesale and retail levels is also an important element, because it allows for innovations that cannot realistically arise in a regulated monopoly environment, and, at least in theory, should do a better job of allocating the output of variable-output renewable power sources to customers. Two features distinguish retail electricity markets from most other types of markets: (1) the need for continuous balance between supply and demand, (2) the fact that all players share the distribution infrastructure, and (3) electricity is a pure commodity product. The result is that without an e ective mechanism design for balancing, individual retail brokers can free ride by selling power without having purchased an equal amount of power. This problem is relatively easy to solve in an environment where virtually all power is produced centrally by baseload facilities such as hydro and fossil fuel plants, and where the retail customers are almost exclusively consumers, and not producers of power . The problem becomes much more complex as the proportion of variable-output renewable sources increases, and as distributed production and storage facilities are introduced into the retail grid.