A Risk Diversification Strategy for Integrated Demand Response Under Imperfect Rationality

Integrated demand response (IDR) is acknowledged as a cost-effective and low-carbon tool that helps alleviate imbalances between energy supply and demand in energy systems. However, the imperfect rationality of consumers can lead to a series of new issues, such as cognitive characteristics of bounded rationality as well as irrationality, subjective uncertainty, and correlated risks. This paper proposes an improved consumer model by using a dynamic subjective weight function with a rationality degree indicator to cope with cognitive characteristics, coupled with a deduced skew distribution modelling the subjective uncertainty. Besides, MESP model is also improved to deal with the correlated risks by managing the diversification level of risks that is defined based on Shannon entropy. The mathematical formulation of the proposed model is expressed as a bi-level stochastic optimization problem, which is equivalently converted into a single-objective optimization problem to be solved efficiently. Simulation results validate advantages of our model in enhancing the accuracy of consumer behavior prediction, effectiveness of incentive strategies, diversification level of response risks, which contributes to achieve a win-win situation between consumers and MESP by decreasing not only total response power deviation as well as cumulative response risks of MESP but also consumer's discomfort level.