Decision-making framework for supplying electricity from distributed generation-owning retailers to price-sensitive customers

•We propose a risk-based model for optimal energy acquisition of DG-owning retailers.•The optimal framework is determined based on price uncertainty and demand response.•The IGDT method is addressed for evaluating the financial risk.

In this paper, a robust bi-level decision-making framework is presented for distributed generation (DG) owning retailers to supply the electricity to price-sensitive customers. Uncertainties about client demand and wholesale prices are the main difficulties faced by the electricity retailer. Clients can adjust their consumption according to the retailer's selling price. A higher selling price increases retailers' profit but decreases client consumption. Hence, the retailer faces a tradeoff between the price and sales. In the proposed model, the optimal selling price and the retailer's energy-supply strategy are modeled in the lower sub-problem. According to the proposed selling price, the optimal energy consumption of price-sensitive clients is determined in the upper sub-problem. To evaluate the financial risk arising from uncertain prices, the Information Gap Decision Theory (IGDT) approach is addressed in the lower sub-problem. Additionally, the risk-based optimization problem is formulated for risk-averse and risk-taker retailers via the robustness and opportunity functions, respectively. The robustness of the optimal solution against price variations is evaluated such that the associated profit will be more than the electricity retailer's acceptable threshold. The efficiency and performance of the decision-making framework are analyzed via a case study, and the numerical results are discussed.