Optimal electricity rate structures for peak demand reduction using economic model predictive control

• This paper presents a primal-dual method for determining optimal electricity prices.
• This primal-dual method is demonstrated on a simulated community of homes.
• Spreading peak prices across 6 h of the afternoon minimizes peak demand.
• Optimal peak electricity prices range from $0.05 to 0.61/kWh.

Economic model predictive control (EMPC) has recently gained popularity for managing energy consumption in buildings that are exposed to non-constant electricity prices, such as time-of-use prices or real-time prices. These electricity prices are employed directly in the objective function of the EMPC problem. This paper considers how electricity prices can be designed in order to achieve a specific objective, which in this case is minimizing peak electricity demand. A primal-dual formulation of the EMPC problem is presented that is used to determine optimal prices that minimize peak demand. The method is demonstrated on a simulated community of 900 residential homes to create a pricing structure that minimizes the peak demand of the community of homes. The pricing structure shows that homes should be given a 1-h peak demand duration, and that the peak prices given to the homes should be spread unevenly across 6 h of the afternoon.