A cheat-proof game theoretic demand response scheme for smart grids

While demand response has achieved promising results on making the power grid more efficient and reliable, the additional dynamics and flexibility brought by demand response also increase the uncertainty and complexity of the centralized load forecast. In this paper, we propose a game theoretic demand response scheme that can transform the traditional centralized load prediction structure into a distributed load prediction system by the participation of customers. Moreover, since customers are generally rational and thus naturally selfish, they may cheat if cheating can improve their payoff. Therefore, enforcing truth-telling is crucial. We prove analytically and demonstrate with simulations that the proposed game theoretic scheme is cheat-proof, i.e., all customers are motivated to report and consume their true optimal demands and any deviation will lead to a utility loss. We also prove theoretically that the proposed demand response scheme can lead to the solution that maximizes social welfare and is proportionally fair in terms of utility function. Moreover, we propose a simple dynamic pricing algorithm for the power substation to control the total demand of all customers to meet the target demand curve. Finally, simulations are shown to demonstrate the efficiency and effectiveness of the proposed game theoretic algorithm.