Efficient incentive-driven consumption curtailment mechanisms in Nega-Watt markets

In this paper we model and analyze Nega-Watt markets, in which a utility operator wishes to curtail some amount of demand load during peak hours, in order to save energy generation costs. The problem for the operator is to select the consumers and the portions of demand load to curtail from each consumer. The major novelty in this setup stems from the arising uncertainty due to consumer non-engagement: even if an a priori agreement is reached between the operator and a consumer about the load to curtail, it is entirely up to the consumer to consume the load or not. The second element that makes the problem different from other markets is the incentive design per se. The operator needs to employ a two-branch incentive, that is, provide consumers with a reward if they actually curtail the load and charge them a fine if they do not. We study various instances of operator-consumers interaction such as bilateral negotiation through non-cooperative games and Stackelberg-game-like interactions. Our results reveal interesting insights about the impact of the arising consumer competition and the consumer-operator interaction on the expected benefits for the operator and the consumers.