Distributed demand side management of heterogeneous rational consumers in smart grids with renewable sources

We consider a demand side management model in which the power provider adopts an adaptive pricing strategy that depends on fluctuations in renewable sources and consumption behavior of customers with heterogeneous marginal utilities in the smart grid. Given the adaptive pricing strategy, we formulate the power consumption behavior of customers as a repeated noncooperative game with incomplete information. We provide an explicit characterization of unique Bayesian Nash equilibrium strategy in terms of individual marginal utilities. The rational behavior is also characterized in a communication scheme where smart meters exchange consumption levels with neighboring meters. A local algorithm that computes equilibrium consumption and propagates beliefs is presented when the network is known. Simulation results show that communication is beneficial for welfare and that power provider can lower the peak-to-average ratio of total consumption by adjusting its target profit ratio.