Pricing Game of Smart Charging Services for Risk-Averse Users in the Smart Grid

Abstract

Electric vehicles play a key role in the transition to an environmental-friendly transportation system and can meanwhile enhance the power system’s evolution to the smart grid. With the adoption of dynamic pricing and usage scheduling enabled by the smart grid equipment, a variety of smart charging strategies have been designed to make the most of flexibility contained in their considerable electricity demand, whereas less effort is devoted to users’ willingness to participate. In this paper, we model a noncooperative pricing game between two types of charging stations. One offers conventional fast charging and the other uses the electric vehicles’ onboard batteries to provide regulation service to the grid. With drivers’ risk attitudes and bounded rationality taken into consideration, we design a prospect theory-based decision model to calculate the proportion of users that would go for the regulation-providing charging option. The decision model of the customer base is a critical determinant of profitability and it enables two competitors to strategically set their prices that optimally balance between gaining in market share and growing in profit per client. We prove the existence of a pure strategy Nash equilibrium for the game proposed and compute the equilibrium prices in different circumstances with respect to market settings and user segments. A comprehensive analysis of the results gives insights into the key factors at play and provides the grid operators with indications of how to increase the penetration of electric vehicles in the ancillary service market.