Seminar on application of mechanism design in market-based demand side management.

1. APPLICATION OF MECHANISM
DESIGN IN MARKET-BASED
DEMAND SIDE MANAGEMENT
Name- Vishal Mohanty
Section- EEE (B2)
Roll Number- 61
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2. CONTENTS
1. Introduction
2. Demand Side Management
3. Classification of Demand Side Management
4. Mechanism Design in DSM
5. Classification of Mechanism Design
6. Conclusion
7. References
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3. INTRODUCTION
 The expected growth in global energy demand has motivated many technological advancements in the electricity
grid, allowing bi-directional power and communication flow between grid entities.
 Combined, these technologies can empower the transition towards a smart grid, permitting all the grid portions to
participate in the management of energy flow.
 DSM refers to the methods used to adjust the load profile of an electricity grid in a way that profits both supply
and demand.
 It’s main benefits include maintaining the balance between supply and demand and deferring some of the
required investments in electricity infrastructure.
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4. DEMAND SIDE MANAGEMENT
 Demand Side Management (DSM) is a strategy used by electricity utilities to control the demand by
encouraging consumers to modify their level and pattern of electricity usage.
 DSM is the modification of consumer demand for energy through the various methods such as financial
incentives and behavioural change through education.
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7. CLASSIFICATION OF DEMAND SIDE MANAGEMENT
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8. MECHANISM DESIGN IN DSM
 Mechanism design is applicable when a principal is assigned with setting the rules of the market so that a
desired economic objective can be achieved.
 One of the common applications of mechanism design is the pricing and provision of public goods.
 It can be difficult task that mechanism designer doesn’t know the preferences of the market participants.
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9. CLASSIFICATION OF MECHANISM DESIGN
 Mechanism design can help in selecting social outcomes that avoid inefficiences in the allocation of a
good or service.
 The four classifications are:
1. Revelation
2. Allocation
3. Sequence
4. Scalability
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10. REVELATION
 The revelation principle states that if a social choice function can be implemented by any mechanism, it
can be implemented by a direct one without any loss of payoff.
 The direct mechanisms become less desirable where agents prefer to keep their information private.
 This is a limitation when designing mechanisms for DSM as consumers may be reluctant to share their
demand information and their value of that demand.
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11. ALLOCATION
 A central architecture refers to a supply chain system where a central entity makes allocation decisions
based on its interactions with its agents.
 This can be inconvenient for consumers who are not equipped with distributed resources or storage
systems.
 Consumers are usually unable to forecast their consumption accurately.
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12. SEQUENCE
 In contrast use an iterative structure where agents update their bids at each step in response to a signal
received from the mechanism designer.
 Mechanisms that adopt the one-shot bidding process are more robust to communication delays.They can
also be a faster to implement.
 This can be worse when communication fails or delays are considered.
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13. SCALABILITY
 Both large and small customers should engage in demand flexibility markets to ensure the success of
such schemes.
 Scalability is one of the most important features of demand side mechanisms.
 A two-level of hierarchical structure for DSM where small customers and the DRA interact at the lower
level, while DRA’s offer their flexibility services to the grid at the higher level.
 Scalability is an essential requirement for the practical implementation of DSM mechanisms.
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14. CONCLUSION
By designing markets that properly align the incentives of consumers with the needs of the grid,
mechanism design can encourage the development of demand response programs that benefit both
consumers and utilities. However, it is important to carefully consider the design of these mechanisms
to ensure that they are well-suited to the particular market context in which they will be implemented.
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15. REFERENCES
● Sharifi R, Fathi S, Vahidinasab V. A review on demand-side tools in electricity
market. Renew Sustain Energy Rev 2017;72:565–72.
● Albadi M, El-Saadany E. A summary of demand response in electricity markets.
Electr Power Syst Res 2008;78:1989–96.
● Chrysikou V, Alamaniotis M, Tsoukalas LH. A review of incentive based demand response
methods in smart electricity grids. Int J Monit Surveill Technol Res (IJMSTR) 2015;3:62–73.
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16. THANK YOU
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