Incentivizing Reliability in Demand-Side Response

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Incentivizing Reliability in Demand-Side Response

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Title: Incentivizing Reliability in Demand-Side Response
Author: Ma, Hongyao; Robu, Valentin; Li, Na; Parkes, David C.

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Citation: Ma, Hongyao, Valentin Robu, Na Li, David C. Parkes. 2016. Incentivizing Reliability in Demand-Side Response. In Proceedings of the 25th International Joint Conference on Artificial Intelligence (IJCAI 2016), New York, NY, July 9-15, 2016.
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Abstract: We study the problem of incentivizing reliable demand-response in modern electricity grids. Each agent is uncertain about her future ability to reduce demand and unreliable. Agents who choose to participate in a demand-response scheme may be paid when they respond and penalized otherwise. The goal is to reliably achieve a demand reduction target while selecting a minimal set of agents from those willing to participate. We design incentive-aligned, direct and indirect mechanisms. The direct mechanism elicits both response probabilities and costs, while the indirect mechanism elicits willingness to accept a penalty in the case of non-response. We benchmark against a spot auction, in which demand reduction is purchased from agents when needed. Both the direct and indirect mechanisms achieve the reliability target in a dominant-strategy equilibrium, select a small number of agents to prepare, and do so at low cost and with much lower variance in payments than the spot auction.
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