Deadline Differentiated Pricing of Delay-Tolerant Demand

A large fraction of the total electric load is comprised of end-use devices whose energy demand is inherently deferrable in time. Of interest is the potential to leverage on such latent flexibility in demand to absorb variability in power supplied from intermittent renewable generation. The challenge, however, lies in designing incentives to reliably induce the desired response in demand. To this end, we propose a novel forward market for differentiated electric power services, where consumers consent to deferred service of pre-specified loads in exchange for a reduced per-unit price for energy. The longer a consumer is willing to defer, the larger the reduction in price. The proposed forward contract provides a guarantee on the aggregate quantity of energy to be delivered by a consumer-specified deadline. Under the earliest-deadline-first (EDF) scheduling policy, which is shown to be optimal for the supplier, we explicitly characterize a deadline-differentiated pricing scheme that yields an efficient competitive equilibrium between supply and demand. We further show that this efficient pricing scheme, in combination with EDF scheduling, is incentive compatible (IC) in that every consumer would like to reveal her true deadline to the supplier, regardless of the actions taken by other consumers.