Electrical Power and Energy Systems 147 (2023) 108831

Contents lists available at ScienceDirect

International Journal of Electrical Power and Energy Systems

journal homepage: www.elsevier.com/locate/ijepes

Constructing a (fair) load-reduction emergency demand response program:

A fee-and-rebate pricing mechanism
Yu-Ching Lee a, Hsin-Wei Hsu b, c, *, Yen-Chang Chang a, Ying-Lien Chen a, Ming-Chuan Chiu a
a
Department of Industrial Engineering and Engineering Management, National Tsing Hua University, Hsinchu, Taiwan
b
Department of Industrial Engineering and Management, National Taipei University of Technology, Taipei, Taiwan
c
Department of Industrial and Systems Engineering, Chung Yuan Christian University, Taoyuan, Taiwan

A R T I C L E I N F O A B S T R A C T

Keywords: Emergent power shortages and power outages cause enormous economic losses. Special fees and rebates at times
Power shortage when the operating reserve is below standard are among the most popular mechanisms for driving demand
Operating reserve response, i.e., a spontaneous reduction in power usage, to help alleviate peak loads. However, a rebate which is
Demand response
uniform for all users usually under- or over-estimates companies’ incentive to respond, as product profitability
Power usage reduction
Scarcity price
and the cost of manufacturing vary from one company to another. As a result, the power provider either fails to
Game theory sufficiently reduce the load during a period of scarcity of electric power or unduly sacrifices profits to pay an
excessive rebate. This study presents a Stackelberg game-theoretic model that determines discriminative rebates
and scarcity pricing of electricity, thereby capturing incentives of different industrial users to respond rationally
and reduce their power usage. The model can be used to assess the current pricing and rebate structure and has
the potential to serve as the fee-and-rebate mechanism in an Emergency Demand Response Program. A case study
is used to simulate a game between the Taiwan Power Company and four classes of heterogeneous industrial
customers who are willing to cooperate with the power provider on implementation of an Emergency Demand
Response Program. The results show that the profits of the participants are higher than the profits of the non-
participants. Moreover, a high-value-added and non-interruptible manufacturing class should be paid higher
rebate.

depending on time of use, and provides reasonable rebates to guide in­

dustrial users to change their electricity consumption behavior in order
1. Introduction
to maintain a secure operating reserve. In a non-cooperative electricity
market, there is a conflict of interest between industrial users and the
A reliable power supply is crucial for operating a power system.
power provider. Constructing an equilibrium model of the Stackelberg
When a power shortage occurs, it affects economic growth, employment,
game means that the profits of different classes of industrial and users,
and growth of the gross domestic product (GDP) of the affected country.
and the relationship of electricity consumption between industrial users
To maintain power reliability, electric utilities are obligated to exercise
and the power provider, are equilibrated. Industrial users with different
flexibility in responding to expected or unexpected situations. Some
manufacturing characteristics can meet their production requirements
demand-side management mechanisms have been employed in the
to achieve a fair result.
market.
In this paper, a nonlinear bi-level model of a non-cooperative
An emergency demand response program (EDRP) provides incentive
Stackelberg game is proposed. In the model, the leader (power pro­
payments (rebates) to customers for reducing their loads during
vider) is in the upper-level optimization problem, where the objective
reliability-triggered events, but the curtailment in usage is voluntary
function has three different major principles that must be considered,
[1]. Although these are voluntary programs with no penalty for users
and the followers (industrial users) are in the lower-level optimization
who do not reduce their power usage, and there is uncertainty in the
problem, where the objective function is designed to maximize their
peak reduction, EDRPs obtained very good results in the U.S. in 2005
profits. By duality theory for linear optimization programs in the lower
[2].
level, the primal form of an industrial user’s optimization problem has
This study proposes a general pricing mechanism to adjust prices

* Corresponding author.
E-mail address: afu0330@gmail.com (H.-W. Hsu).

https://doi.org/10.1016/j.ijepes.2022.108831
Received 10 February 2022; Received in revised form 15 September 2022; Accepted 26 November 2022
Available online 13 December 2022
0142-0615/© 2022 Elsevier Ltd. All rights reserved.
Y.-C. Lee et al.
Nomenclature
Sets:
I set of industrial users with an EDRP contract
T set of time units from the beginning to the end of a scarcity
period
Power provider’s decision and auxiliary variables:
Qt (kWh) quantity of electricity purchased from external suppliers by
the power provider at time t for use during the following
hour
qt (kW) electric power generated by the power provider at time t
St (USD/kWh) scarcity price of electricity per kilowatt-hour
published by the power provider (for its general users) at
time t
λit (USD/kWh) rebate offered by the power provider per kilowatt-
hour reduction in electricity usage by contracted industrial
user i at time t, based on user i’s standard level of
consumption
Gt (kW) gap in electric power needed to achieve a percent
operating reserve of PORt at time t, which is positive (0,
negative) when the percent operating reserve is less than
(equal to, greater than) PORt at time t
Industrial user i’s decision variables:
Rit (kWh) reduction in electricity consumption by industrial user i at
time t, based on that user’s standard level of consumption
Xit+ (kWh) quantity of electricity use restored from time t − 1 to time t
by industrial user i
Xit− (kWh) quantity of electricity use diminished from time t − 1 to
time t by industrial user i
Industrial user i’s Lagrange multipliers:
Y1,it Lagrange multipliers for constraints (3)
Y2,it Lagrange multipliers for constraints (4)
Y3,it Lagrange multipliers for constraints (5)
Y4,it Lagrange multipliers for constraints (6) for t = 0
Y5,it Lagrange multipliers for constraints (6) for t = |T|+1
Y6,it Lagrange multipliers for constraints (7)
Y7,it Lagrange multipliers for constraints (8)
Y8,t Lagrange multipliers for constraints (9)
Y9,t Lagrange multipliers for constraints (10)
Parameters:
Uit (kWh) standard quantity of electricity consumed by industrial
user i at time t, which can be interpreted as the quantity of
electricity that industrial user i would have used at time t
feasible solutions if and only if the dual form has feasible solutions, in
which case the optimal values of the primal and dual problems are equal.
Thus the need for an equivalent formulation of the lower-level optimi­
zation problems arises. Embedding the feasibility and strong duality
conditions of the lower level optimization problem within the set of
constraints of the upper-level optimization problem eliminates the need
for the bi-level structure and makes the non-cooperative Stackelberg
game a single optimization problem with nonlinear constraints.
To implement this fee-and-rebate pricing model, we divide the EDRP
program into two phases. In the first phase, the power provider will ask
all industrial users if they would like to participate in the calculation of
their reduction in electricity consumption during peak electricity con­
sumption periods. In the second phase, the power provider will inform
each industrial user of its results (rebate and reduction in electricity
consumption) and will ask users if they would like to participate in the
EDRP. Thus during electricity scarcity periods, the power provider could
2
International Journal of Electrical Power and Energy Systems 147 (2023) 108831
without an EDRP contract
ut (kWh) standard quantity of electricity used at time t by users who
have not signed an EDRP contract with the power provider
S0 (USD/kWh) minimum scarcity price of electricity per kilowatt-
hour published by the power provider (for its general
users)
S(USD/kWh) maximum scarcity price of electricity per kilowatt-
hour published by the power provider (for its general
users)
λ1 (USD/kWh) maximum possible rebate provided by the power
provider at all times t
T(kWh) maximum quantity of electricity that can be generated by
the power provider at time t
M(kWh) maximum quantity of electricity that can be purchased
from external suppliers by the power provider at time t for
use during the following hour
Ct (USD/kWh) cost per kilowatt-hour of electricity generated by the
power provider starting at time t, measured by the
weighted average of the costs of all types of fuels to be used
starting at time t
Bt (USD/kWh) average price per kilowatt-hour of electricity
purchased by the power provider from other suppliers at
time t
Fit (USD/kWh) basic maintenance cost incurred by industrial user i
per kilowatt-hour reduction in electricity usage at time t
Π penalty (in terms of money) imposed on the power
provider per kilowatt of power less than the percent
operating reserve of PORt per observed occurrence during
a period of electricity scarcity
π penalty (in terms of money) imposed on the power
provider’s payment to industrial users with an EDRP
contract
nit (unit of product) minimum required production by industrial user i
during the hour starting at time t
Vi (kWh/unit of product) average electricity consumption per unit of
production by industrial user i
Wi (USD/unit of product) setup cost per unit of production which is
incurred by industrial user i to restore power usage
Pi (USD/unit of product) profit earned by industrial user i per unit of
production over and above its minimum production
PORt the secure level guaranteeing power supply reliability at
time t, which is the difference between the net peaking
capability and the peak load (instantaneous value),
normalized by the peak load (instantaneous value) and
expressed as a percent, to maintain reliable operation
drive operating reserves back to a secure level and potentially save the
cost of opening extra power plants.
2. Literature review
2.1. Emergency demand response programs (EDRPs)
The authors of [3] presented an EDRP model and demonstrated
appropriate tools for managing the local marginal prices (LMPs) of the
power market more efficiently. Our model incorporates the cost of
restoring power to machinery at the end of a scarcity period (a period in
which machines were shut down to reduce electricity consumption)
once regular electricity consumption has resumed—a cost that is
considerable for some industrial users.
The authors of [4] proposed an event-driven-based EDRP scheme to
choose the proper demand response (DR) participants and minimize the
Y.-C. Lee et al.
total cost while holding a certain level of electric power in reserve. In our
approach, the demand reduction is estimated after calculating the users’
costs, hence the overall structure is more rigorous. Another contribution
is the choice of the proper DR participants.
The authors of [5] brought up the unit commitment (UC) problem of
thermal units in considering an EDRP, where the UC with EDRP problem
was modeled as a nonlinear, non-convex problem and solved via the
simulated annealing method. They concluded that EDRP is a method
that can solve the power crisis. Our work further dealt with many details
of implementing an EDRP, such as how to set the size of the rebate, the
scarcity price of electricity, and the power provider’s expected power
acquisition from other suppliers, so that an EDRP can be implemented
smoothly.
The authors of [6] proposed a two-stage stochastic game model and
studied a risk-averse energy trading strategy within multi-energy
microgrids. In the context of multi-energy system, energy resources
include electricity and DR capacity and all microgrid operators can sell
energy resources to the energy market. Both uncertainty from the gen­
eration capacity of the renewable energy and from the DR are taken into
account in their formulation. To handle uncertainty, techniques of the
sample average approximation and the conditional value-at-risk mea­
surement are employed. Their work characterizes the relationship be­
tween the price and the quantity of energy sold by microgrid operators,
whereas our work aims to quantify the incentives to reduce load for
heterogeneous industrial users.
The authors of [7] addressed the effect of the customer participation
level in an EDRP and the impact of irrational incentive values in
implementing such a program for use in microgrid operation, and
pointed out that an unreasonable increase in the incentive increased
operating costs. The authors of [8] presented a nonlinear model of an
incentive-based DR program based on the price elasticity of demand and
the benefit for the customer. Based on the results of these two studies, it
is clear that an EDRP contributes to system reliability, but the balance
between setting a reasonable incentive and the willingness of users of
electric power to participate is still a major concern.
The authors of [9] proposed a two-stage stochastic programming
model for minimizing the total operating cost and maximizing the DR
aggregator profit at the same time. The difference between their study
and ours is that they considered units’ ramp-up and ramp-down use of
wind power, while we considered the percent operating reserve and the
size of the penalty which could ensure a stable power supply during
times of spikes in electricity usage. Their model considers the total cost
of DR scheduling but does not decide the price of electricity charged by
the power provider.
Although the authors of [10] considered the electricity pricing and
incentive offering of EDRP with consumers preferences, they focus on
the length of customer decision-making cycle which are short-range and
long-range consumers. In our study, we focus on the impacts of different
industry categories on EDRP, and uses the Stackelberg game to find out
the best decision between power companies and manufacturers. The
authors of [11] integrate renewable energy, incentives and price
mechanisms for modeling and analysis and consider on each other and
supply side. However, this research focuses on market uncertainty and
reliability, and still does not fill in the interactive effects of power
companies and different industries on EDRP strategies.
2.2. Game theory in the electricity market
The authors of [12] employed a Stackelberg game between utility
companies and end-use customers to maximize the revenue of each
utility company and the payoff of each user, and studied the impact of an
attacker who can manipulate the price information provided by the
utility companies. The authors of [13] posed a game-theoretic model
that accounts for the Stackelberg relationship between retailers (leaders)
and consumers (followers) in a dynamic price environment. Unlike the
Stackelberg game employed in our model, both types of players in their
3
International Journal of Electrical Power and Energy Systems 147 (2023) 108831
game solve an economic optimization problem subject to stochasticity in
prices, weather-related variables, and the must-serve load. Also, their
study dealt with large-scale integration of renewable power sources,
while our research focused on programs which can directly resolve the
crisis in the electricity market in an emergency and is suitable for short-
term implementation. Compared programs in which there is the large-
scale integration of renewable power sources, our model will not
cause fluctuations in the electricity market.
The authors of [14] presented a game-theoretic DR program which
comprises into two problems: the dynamic economic emission dispatch
problem and the price-based dynamic economic emission dispatch
problem. For the leader, the objectives are to minimize fuel costs and
emissions and determine the optimal incentive and load curtailment for
customers, while the follower’s model seeks to minimize emissions,
maximize profits, and determine the optimal incentive and load
curtailment for customers. The authors of [15] constructed an
incomplete-information game model between demand response aggre­
gators for selling energy previously stored, in order to predict and
analyze the bid made for energy sale in the market. The authors of [16]
studied the combined problem of power provider selection and DR
management in a smart grid network consisting of multiple power
companies and multiple customers by adopting a reinforcement-
learning and game-theoretic technique. The authors of [17] consid­
ered bidirectional interaction between a power grid and a smart grid by
using the Stackelberg game method to increase the net profit and reduce
fluctuation in demand. The authors of [18] build up a framework for
distributed energy resources integration through a single-leader-multi-
follower Stackelberg game model with the aggregator as the leader
and the system and distribution system operators as the followers.
The Stackelberg game is a suitable model for describing the non-
cooperative competition between a leader (power provider) and multi­
ple followers (industrial users). However, Stackelberg games were not
employed in the literature to find the best scarcity price of electricity and
the size of the rebates, or to forecast the contracted users’ reduction in
electricity usage for the purpose of streamlining power distribution by a
power provider under an EDRP.
3. Formulation of a Bi-level optimization model
To formulate the Stackelberg game, we consider a bi-level pro­
gramming model that treats the power provider’s multi-objective
maximization problem and the industrial users’ profit maximization
problems as upper-level and lower-level problems, respectively. A flow
diagram of building the bi-level optimization model is shown in Fig. 1.
The left box contains the setup of the model: the power provider’s pa­
rameters and the industrial user i’s parameters are summarized in the
beginning of this paper; the restrictions on coefficient in front of Rit are
discussed formally in Section 3.2.2; to validate the model, we consider
15 scenarios where four classes of the industrial users are the potential
participants of the EDRP. These 15 scenarios are formally introduced in
next section. In particular, when the number of participants increases,
the profits realized by the power provider must also increase.
The central box of Fig. 1 illustrates the key techniques to build the bi-
level optimization model. The selection of the weights for the three
objectives of the power provider is discussed in Section 3.2.3. To embed
the lower-level optimization model within the upper-level optimization
model, we employ the typical Karush-Kuhn-Tucker condition, which
requires primal feasibility, dual feasibility, and equal primal and dual
values for the linear program. These techniques are shown in Section
3.1.
The right box of Fig. 1 summarizes the major output of the bi-level
optimization model. The mechanism behind this bi-level optimization
program is a Stackelberg game, thus the optimal solution of the model is
theoretically a Nash equilibrium between the power provider and the
industrial users.
A unique characteristic of our model is a constraint on the minimum
Y.-C. Lee et al. International Journal of Electrical Power and Energy Systems 147 (2023) 108831

level of electric power that’s available to customers. This characteristic ∑ ∑

fits the goal of a power provider that is the only power provider in a Uit − Rit + ut ≤ Qt + qt , t ∈ T (10)
country, where the supply of electricity is typically regulated by the
i∈I, i∈I,

government to maintain a sufficient supply and adequate security at all

times.
3.1. Bi-level optimization for pricing
The following models of Stackelberg game formulation for pricing set
the time units of scarcity from t = 1 to t = |T|, where t = 1 is the time unit
in which the period of scarcity begins and t = |T| is the time unit in
which it ends. The duration of each time unit is ty-pically-one hour.
The objective of industrial user i is to maximize its profit during
scarcity periods. The decision variables for industrial user i are the
reduction in power consumption at time t and the number of units of
products produced during the electricity scarcity period. The profit
during a given time unit is calculated as the sum of the potential profits
earned from products produced and the hourly rebate, less the sum of
the hourly cost of electricity and the setup cost to restore the use of
electricity for production. Here we use the technique of expressing the
absolute value of the difference in electricity consumption, |X|, as X+ +
X− , where X+ ≥ 0 is the positive portion (quantity of electricity restored
between consecutive time units), and X− ≥ 0 is the negative portion
(diminished quantity of electricity use between consecutive time units)
of a real valued variable X which is defined as follows:
X + = Xif X ≥ 0 ; X + = 0 if X < 0
Rit , Xit+ , Xit− ≥ 0, i ∈ I, t = 1, ⋯, |T| + 1 (11)
Constraint (3) states that industrial user i’s reduction in load cannot
exceed the amount. Constraint (4) states that the profit realized by in­
dustrial user i under a reduction in electricity consumption must be at
least as high as the profit. Constraint (5) states that the difference in its
electricity consumption between time t and time t + 1 is equal to its
restored quantity of electricity from time t to time t + 1 if nonnegative,
or to its diminished quantity of electricity use from time t to time t + 1 if
negative. Constraint (6) states that there is no reduction in electricity
consumption immediately before or after the scarcity period. Constraint
(7) requires the reduction in electricity consumption by industrial user i
to be no greater than the standard quantity of electricity it consumes.
Constraint (8) requires the quantity electricity restored by user i at time t
to be no greater than the reduction in electricity consumption by in­
dustrial user i at time t. Constraint (9) states that the sum of the re­
ductions in electricity consumption by all industrial users at time t must
not exceed the amount needed to achieve the percent operating reserve
requirement. Constraint (10) requires the supply of power during a time
unit in a scarcity period to be at least as high as the demand. Constraint
(11) specifies that the quantities of electricity consumed by the partic­
ipants are non-negative decision variables.
The dual problem of the linear program (2)–(11) is as follows:

( ( ))
⎧ ∑ Qt +qt +Gt ⎫
⎪
⎪ (Uit − n V
it i )Y1,it +U Y
it 6,it + U ′ +u t − Y8,it + ⎪
⎪
⎪ i t
1+PORt ⎪
∑⎪ ⎨ ′
i ∈I,
⎪
⎬
minimize ( ) (12)
⎪
t∈T ⎪ ∑ ⎪
⎪
⎪
⎪ ⎪
⎪
⎩ Qt +qt − Ui′ t − ut Y9,it ⎭
′
i ∈I,

X − = − Xif X < 0 ; X − = 0 if X ≥ 0. (1) subject to the following constraints:

Industrial user i’s optimization problem for a scarcity period is Y3,it + Y4,it ≥ 0, i ∈ I, t = 0 (13)
( ) ( )
∑{ ( ) ( + ) } +
Xi,|T+1| −
+ Xi,|T+1| Wi Pi
Pi Xit + Xit− Wi Y1,it + − λit − St + Y2,it − Y3,i,t− 1 + Y3,it + Y6,it − Y7,it + Y8,t − Y9,t
maximize Rit λit + St − − − Vi
t∈T
Vi Vi Vi
Pi
(2) ≥ λit + St − , i ∈ I, t ∈ T (14)
Vi
subject to the following constraints: − Y3,i,t− 1 + Y5,it ≥ 0, i ∈ I, t = |T| + 1 (15)
Uit − Rit ( ) ( )
nit ≤ , i ∈ I, t ∈ T (3) Wi − Wi
Vi Y2,it − Y3,i,t− 1 + Y7,it ≥ , i ∈ I, t ∈ T (16)
Vi Vi
( ) ( + )
Pi Xit + Xit− Wi ( ) ( )
Rit − St ≤ Rit (λit ) − , i ∈ I, t ∈ T (4) Wi
Y2,it + Y3,i,t− 1 + Y7,it ≥
− Wi
, i ∈ I, t ∈ T (17)
Vi Vi Vi Vi
( )
+
Rit − Ri,t+1 = Xi,t+1 −
− Xi,t+1 , i ∈ I, t = 0, ⋯, |T| (5) − Y3,i,t− 1 ≥ − VWi i , i ∈ I, t = |T| + 1 (18).
( )
Rit = 0, i ∈ I, t = 0, |T| + 1 (6) Y3,i,t− 1 ≥ − VWi i , i ∈ I, t = |T| + 1 (19)

Rit − Uit ≤ 0, i ∈ I, t ∈ T (7) Y1,it , Y2,it , Y6,it , Y7,it ≥ 0, i ∈ I, t ∈ T

( ) Y3,it free, i ∈ I, t = 0, ⋯, |T|,

Xit+ + Xit− − Rit ≤ 0, i ∈ I, t ∈ T (8) Y3,it , Y5,it free, i ∈ I, t = 0, |T|+1,
(∑ )
(Qt + qt + Gt ) −
∑ Y8,t , Y9,t ≥ 0, t ∈ T (20)
i∈I, Uit − i∈I, Rit + ut
(∑ ) ≤ PORt , t ∈ T (9)
∑ Next, we introduce the optimization problem of the power provider.
i∈I, Uit − i∈I, Rit + ut
In this program, the set of decision variables is {Q, q, S, λ, G, R, X+, X− ,
Y}.

4
Y.-C. Lee et al. International Journal of Electrical Power and Energy Systems 147 (2023) 108831

Fig. 1. Flow diagram of the proposed bi-level optimization model.

{ (
∑ ∑ ∑ (USD). Constraint (27) requires the rebates received by industrial user i
maximize St Ui′ t − Ri′ t at time t = 0 and at time|T| + 1 to be equal to 0. Constraint (28) requires
the product of the restored quantity of electricity and the diminished
t∈T ′ ′
i ∈I, i ∈I,
) }
∑ quantity of electricity from time unit t = 1 to time unit t + 1 to be zero.
+ ut − Bt Qt − Ct qt − πλi′ t Ri′ t − Gt Π (21)
′
This constraint is sufficient for condition (1) in the lower-level optimi­
zation problem to hold. Constraint (29) requires sum of the industrial
i ∈I,

user’s reduction in electricity consumption at time t must exceed

Qt ≤ M, t ∈ T (22)
allowable operating reserve requirement in PORt %. Constraint (30) re­
qt ≤ T, t ∈ T (23) quires the primal and dual values of industrial user i to be equal.
Constraint (31) collects the primal and dual feasibility conditions.
St − λit ≤ 0, i ∈ I, t ∈ T (24)
3.2. Properties of the fee-and-rebate model
S0 ≤ St ≤ S, t ∈ T (25)
To ensure successful implementation of the bi-level optimization
λit ≤ λ1 , i ∈ I, t ∈ T (26)
model (22)–(31), several coefficients need to be tuned in order to satisfy
λit = 0, i ∈ I, t = 0, |T| + 1 (27). certain major principles. These principles include the restriction of the
Xit+ , Xit− = 0, i ∈ I, t = 1, ⋯, |T| + 1 (28) coefficients of Rit , the upper and lower limit on Rit, and the selection of
(∑ ) the weights Π and π in the objective function.
∑
(Qt + qt + Gt ) − i∈I, Uit − i∈I, Rit + ut Restrictions on reduction in electricity use imposed by the
(∑ ∑ ) ≥ PORt , t ∈ T (29) participants:
i∈I, Uit − i∈I, Rit + ut
Constraint (3) ensures that users will realize a profit that’s acceptable
( ) to them:
∑{ ( ) ( + ) } +
Xi,|T+1| −
+ Xi,|T+1| Wi ( ) ( + )
Pi Xit + Xit− Wi Xit + Xit− Wi
Rit λit + St − − − Pi
Vi Vi Vi Rit − St ≤ Rit (λit ) −
t∈T Vi Vi
( ( )) which states that the profit they would realize if they participate in
⎧ ∑ Qt + qt + Gt ⎫
⎪
⎪ (Uit − nit Vi )Y1,it + Uit Y6,it + ′ Ui′ t + ut −
⎪ Y8,it ⎪
⎪
⎪ the EDRP is higher than the profit they would realize if they do not. Then
⎪ 1 + POR ⎪
∑⎨ ⎬ the power provider will evaluate the fairness of the scarcity price of
t
i ∈I,
= ,i
⎪
t∈T ⎪
(
∑
) ⎪
⎪ electricity (St ) and the amount of the rebate (λit ) for user i based on its
⎪ ⎪
⎪
⎩ + Qt + qt − Ui′ t − ut Y9,it ⎪
⎭ product value added and its power-interruptibility characteristics.
′
i ∈I, If industrial user i’s product value added is too low or its setup costs
∈I are too high, the combination of constraints (4), (25), and (26) on St and
(30) λit cannot be satisfied. Therefore, the power provider cannot charge a
scarcity price St and offer a rebate λit that, taken together, will be
(3)–(11) and (13)–(30), satisfactory to user i, who will then choose not to participate in the
i∈I (31) EDRP. Therefore, the condition that expresses the unwillingness of user i
to participate is that.
Constraint (22) sets the upper limit on the quantity of electricity. ( )
λit +St − VPii ≤ 0 for all feasible St and λit .
Constraint (23) sets the upper limit on electric power generated by the
power provider for use during time unit t. Constraint (24) requires the The limits on Rit in user i’s optimization model:
scarcity price of electricity paid by industrial user i at time t to be no There are two limits imposed on the amount of the reduction in
greater than the amount of the rebate received by that user at time t. power consumption. Industrial user i imposes an upper limit on the
Constraint (25) requires the scarcity price of electricity to be between S0 reduction in its power consumption through constraint (3):nit ≤ (UitV− i Rit ).
(USD) and S (USD) at time t. Constraint (26) requires the amount of the If user i does not reduce its electricity consumption (Rit = 0), the min­
rebate received by industrial user i at time t to be no greater than λ1 imum electricity consumption by user i, Uit − Rit , is nit Vi (a lower bound

5
Y.-C. Lee et al.
on its electricity consumption).
If not all users reduce their electricity consumption, their total
electricity use will exceed the capacity of the power provider, that is, the
percent operating reserve will be less than PORt, so the power provider
has to provide incentives that will reduce the total electricity con­
∑ ∑
sumption, i∈I, Uit − i∈I, Rit , to a level that will achieve the percent
operating reserve set by constraint (9):
(∑ ∑ )
(Qt + qt + Gt ) − i∈I, Uit − i∈I, Rit + ut
(∑ ∑ ) ≤ PORt
i∈I, Uit − i∈I, Rit + ut
The objective of maximizing profits will drive users to reduce their
consumption as much as possible, hence the power provider sets an
upper bound on the percent operating reserve. This serves as another
upper limit on reduction in power consumption for all industrial users
combined.
Building the multi-objective optimization function: selection of
weights:
To build the multi-objective optimization problem, there are three
different sizes of weights (Π, π, and 1) that should be related as follows:
1≪π≪Π
where the symbol ≪ means “much less than,” and the weights need
to be tuned to ensure the priorities of the objectives.
1. To meet the secure percent operating reserve (weight Π): The highest
priority is given to avoiding an emergent scarcity. Whether Π is large
enough is determined by the solution of the model. The secure
operating reserve should be met unless it is impossible to do so, in
which case the gap between PORt and the actual operating reserve
should be minimized.
2. To reduce the cost of rebate payments (weight π): If the first objective
(achieving PORt) is optimized, the second goal is to minimize the
total cost incurred by the power company in the way of rebates paid
to users in order to achieve the needed demand responses. If there is
no upper limit on the sizes of the rebate payments in the objective
function, user i’s optimality conditions that are imposed as con­
straints can technically drive up the value of λit Rit , which is the profit
of user i but also a part of the costs incurred by the power provider.
Whether the weight π has been properly selected can be observed
from the solution of Rit .
3. To maximize the profit of the power provider (weight 1): The final
objective is to consider the profit of the power provider. By setting
the penalties (for failing to satisfy the previous two objectives) high
enough, this objective will help find the most profitable solution
(among all of those that can maximally deal with power scarcity)
that provides an incentive of the power provider to execute such an
EDRP.
4. Execution and implementation of the proposed emergency
demand response program
4.1. Time to execute the emergency demand response program
Power providers define operating reserve as the actual quantity of
electricity schedulable for a day. The percent operating reserve acts as a
major indicator of the reliability of the daily power supply. When the
percent operating reserve at time t drops below a secure level, PORt, it is
said that an electricity scarcity occurs.
We propose a load-reduction EDRP that is intended to trigger a
spontaneous response on the part of users that consists of reducing their
consumption of electricity during periods of scarcity. The choice of the
scarcity periods during which the operating reserve is expected to be
below PORt is based on the historical standard quantity of electricity
consumed by individual users. A scarcity period ends when the percent
6
International Journal of Electrical Power and Energy Systems 147 (2023) 108831
operating reserve is expected to be at or above PORt. Then another
scarcity period could occur later, when the percent operating reserve is
again expected to be below PORt.
The participants in an EDRP are the industrial users who sign an
EDRP contract with the power provider. The power provider informs the
contracted industrial users before the start of each scarcity period. The
contracted users then plan their use of electricity on their own. If the
percent operating reserve is at least PORt at the end of the scarcity
period, the price of electricity reverts to the public price that applies to
all users. Otherwise, the power provider may consider continuing the
scarcity period until the percent operating reserve is at least PORt.
4.2. Two-phase procedure of the load-reduction EDRP
In this game, the power provider divides the establishment of an the
EDRP into two phases. In the first phase, the power provider will ask all
users if they would like to participate in the calculation of the reduction
in their electricity consumption during peak electricity consumption
periods, the purpose of which is to reduce the probability of scarcity in
the availability of power and/or outright failure of the system. In the
second phase, the power provider publishes the scarcity price of elec­
tricity, together with the sizes of the rebates per unit reduction in
electricity usage and the amount of the reduction in electricity usage
required of each industrial user. Users will consider whether to partic­
ipate in the EDRP program based on the results of the calculations. This
study assumes that the fees and rebates are published in near-real time,
that is, close to the time when the demand-responsive strategy is acti­
vated, whereas the standard level of consumption is stated in the con­
tract between the power provider and the individual industrial user,
which is signed before any period of scarcity occurs. The power provider
has an option to buy electricity from other suppliers at a price deter­
mined by those suppliers.
Given the time periods of electricity scarcity based on a forecast
made by the power provider, the decisions of the power provider on the
pricing of electricity and the decisions of the contracted users on their
usage of power are made (and are changeable) at each time unit during
the period of electricity scarcity. The overall profit that’s to be maxi­
mized (the profit of the power provider and the profits of the contracted
users) is the sum of the profits measured during that period.
We now present the details of one particular load-reduction EDRP.
Given a set of potential cooperative users, the steps taken by the power
provider before the time periods in T are as follows:
Phase 1.
• Step 0: Retrieve the values of ut, Tt, Mt, Ct, Bt, Fit, nit, Vi, Wi, and Pi for
all industrial users i ∈ I and all time periods t ∈ T for which the
reserve is expected to be below PORt.
• Step 1: Solve the fee-and-rebate pricing model. The solution obtained
consists of R*it , λ*it , S*t , Q*t and q*t for all industrial users i ∈ I and all
prospective time periods t ∈ T.
• Step 2: Remove from the set I all users i for which R*it = 0, and return
to Step 1. If there are no such users, proceed to Step 3.
Phase 2.
• Step 3: Notify users i in the (current) set I with a formal notice such as
the following:
• “A period of scarcity of electricity is about to begin. During this period, the
scarcity electricity price will be adjusted to S*t . To avoid the risk of a power
outage, you will receive a rebate price of λ*it USD per kWh reduction in
electricity usage, where such reduction will not exceed R*it kWh.”
• Step 4: At each time unit t, t = 1,⋯,|T|, the power provider generates
qt kW of power, buys Qt kWh of electricity from external suppliers,
and publishes the scarcity electricity price S*t to the public. User i
Y.-C. Lee et al.
responds to the public price S*t and to its individual rebate offer λ*it by
adjusting its demand.
• Step 5: Att = 1, ⋯, |T| + 1, scarcity period will end. The power
provider then either starts the next scarcity period or returns to
normal.
In Step 0, the power provider communicates with the potential
cooperative users through a designated association. Information on user
i (Fit, nit, Vi, Wi, and Pi) comprises its historical statistics and some pre­
dictions regarding its consumption of electricity. Other internal oper­
ating parameters (ut, Tt, Mt, Ct, and Bt) are derived from the power
provider’s regular statistics. In Step 1, the fee-and-rebate pricing model
can be solved by any existing nonlinear optimization solver. A case study
that shows the resulting values of the decision variables R*it , λ*it , S*t , Q*t
and q*t is given in Section 4. It will be seen in the results of that case study
that there exists a scenario in which R*it = 0 is possible for some user i ∈ I.
This situation implies that user i is indifferent (in terms of profits) be­
tween participating in the EDRP and not participating in it, and that the
power provider can achieve an operating reserve of PORt from the de­
mand responses of the other users, and at a cost no higher than if the
demand response of user i were included. Thus we eliminate user i from
the set I in Step 3 and solve the nonlinear optimization model. Step 4
describes the actions taken by the power provider and the users during
the scarcity period. Step 5 describes the two possible situations at the
end of the scarcity period. For the second situation mentioned in Step 5,
Fig. 2. Quantity of electricity (in GWh) consumed by different sectors.
7
International Journal of Electrical Power and Energy Systems 147 (2023) 108831
returning to normal means that the price is reset at the standard elec­
tricity price and that no rebate will be provided to any user for reducing
their demand.
5. Results and discussions with case study
Along with global warming, the temperature in Taiwan in summer is
increasing significantly. As a result, electricity consumption reaches a
new peak load of power usage each year. According to Taiwan Power
Company (TPC) statistics, the number of days on which the percent
operating reserve was less than the secure operating reserve set at 6 %
increased from 9 in 2014 to 104 in 2017.
The load reduction EDRP is one of several methods of receiving a
monetary reward from TPC that became effective in July 2018 [19].
Industrial users with consumption of at least 100 kW of electricity
(standard quantity of electricity consumed) are eligible to sign an EDRP
contract with TPC. In the contract, each user with electricity consump­
tion that does not exceed 5,000 kW agrees to a reduction in consumption
that is at least 20 % of its standard electricity consumption during every
period of electricity scarcity, and TPC is required to officially inform
users of the start and end times of each scarcity period at least T
̂ minutes
prior to starting. If a company’s actual reduction in electricity use is R ≥
R,
̂ an implementation rate of δ% is calculated as R/ R ̂ × 100 %.
Depending on the value of T,
̂ a base monthly rebate is calculated as
R×P̂T × δ%, where the values of P̂T (in USD/kW-month) that
̂
Y.-C. Lee et al. International Journal of Electrical Power and Energy Systems 147 (2023) 108831

Table 1 electricity during the off-peak period is about 0.099 USD/kWh, so we

The four classes of aggregate manufacturers. have assumed that the lower limit on the price of electricity is 0.1 USD/
High Value added Low Value added kWh. The maximum total price of electricity during the peak period is
about 0.28 USD/kWh, so we have assumed that the upper limit on the
Non- Electronic parts and components Plastic products
Interruptible manufacturer (User 1) manufacturer (User 2) price of electricity is 0.3 USD/kWh, which was calculated as three times
Interruptible Transport equipment Basic iron and steel the lower limit. The maximum and minimum quantities of electricity
manufacturer (User 3) manufacturer (User 4) generated and purchased by the power provider before the imple­
mentation of the EDRP were set at 27,300 MWh and 11,165 MWh,
respectively, according to the past power supply capability of TPC.
correspond to T̂ = 15, 30, 60, and 120 are 3.35, 3.00, 2.71, and 2.52,
Parameters were estimated based on TPC statistics, the Ministry of
respectively. A variable rebate is calculated as R × λ × H, but only when Finance of Taiwan, and Statistics Department, Ministry of Economic
R ≥ R,
̂ where λ (USD/kWh) is set at a constant value of 0.32 for all users Affairs, of Taiwan. The average electricity consumption per unit pro­
and H is the total number of hours of periods of scarcity in that month. duction of industrial user i was estimated as the ratio of its historical
electricity consumption to its production capacity. We started by dealing
5.1. Classes of industrial users with meeting the percent operating reserve. After that, we dealt with
setting the rebate payment of each user. And finally, we maximized the
Industrial electricity consumption takes up more than half of Tai­ profit of TPC. More detailed parameters are presented in Table 2.
wan’s electricity consumption. Fig. 2 shows the quantity of electricity We studied a total of 15 scenarios, one for each nonempty subset of
consumed by different sectors [20]. the four manufacturing classes participating in the EDRP. The partici­
This study chose electronic parts and components aggregate manu­ pants in each scenario are given in Table 3: In scenario A, the EDRP was
facturers as industrial user 1, plastic products aggregate manufacturers implemented with all four users, each representing a different industrial
as industrial user 2, transport equipment aggregates manufacturers as class. In scenarios B–E, the EDRP was implemented with three aggregate
industrial user 3, and basic iron and steel aggregate manufacturers as industrial users. In scenarios F–K, two aggregate industrial users
industrial user 4. Each user represents a different class of manufacturing,
as shown in Table 1: high-value-added non-interruptible manufacturing,
low-value-added non-interruptible manufacturing, high-value-added Table 3
interruptible manufacturing, and low-value-added interruptible Fifteen scenarios for the implementation of the EDRP.
manufacturing. This study examined how the proposed model de­ Number of users participating in Four users Three Two One
termines the discriminative rebates offered to different classes of the first phase of EDRP users users user
aggregate industrial users. It is assumed that all the companies in these Users participating in the first A: Users 1, B: Users F: Users L: User
four manufacturing classes have signed a contract to participate in the phase of EDRP in each 2, 3, 4 1, 2, 3 1, 2 1
EDRP. scenario C: Users G: Users M:
1, 2, 4 1, 3 User 2
D: Users H: Users N:
5.2. Setting of the parameters and the scenarios studied 1, 3, 4 1, 4 User 3
E: Users I: Users O:
2, 3, 4 2, 3 User 4
The implementation time units are t = 1 through t =|T|. We assumed
J: Users
that before the implementation of the EDRP, the percent operating re­ 2, 4
serves during time units t = 1, t = |T| − 1, and t = |T| were 3.47 %, 3.21 K: Users
%, and 3.31 %, respectively. Taking into account the high-voltage and 3, 4
ultra-high-voltage fees charged by TPC to its customers, the price of

Table 2
Parameters for four classes of aggregate manufacturers.
Source Parameters t¼1 t¼ |T|-1 t¼ |T|

Information from TPC Percent Operating Reserve 3.37 % 3.11 % 3.22 %

U1t (1000 kWh) 7,762.12 7,764.20 7,762.12
U2t (1000 kWh) 1,317.25 1,318.25 1,317.25
U3t (1000 kWh) 643.74 732.62 699.58
U4t (1000 kWh) 2,835.44 2,835.44 2,835.44
ut (1000 kWh) 24,651.97 24,652.74 24,651.97
Ct (USD/kWh) 0.008 0.008 0.008
Bt (USD/kWh) 0.1 0.1 0.1
PORt (%) 6 6 6
λ1 (USD/kWh) 1
S0 (USD/kWh) 0.1
S (USD/kWh) 0.3
T (1000 kWh) 27,300
M (1000 kWh) 11,165
Π(quadrillion USD)π(trillion USD) 53
80
Information from aggregate industrial users W1 (USD/unit of product) 0.003
W2 (USD/unit of product) 0.003
W3 (USD/unit of product) 0.0000001
W4 (USD/unit of product) 0.0000001
P1 (USD/unit of product) 0.05
P2 (USD/unit of product) 0.0009
P3 (USD/unit of product) 0.05
P4 (USD/unit of product) 0.0009
V1 , V2 , V3 , V4 (kWh/unit of product) 0.16

8
Y.-C. Lee et al. International Journal of Electrical Power and Energy Systems 147 (2023) 108831

Table 4
Result for the 15 scenarios with a fixed scarcity price.
Scenario St λ1 λ2 λ3 λ4 Qt qt R1 R2 R3 R4 POR Gt

A 0.1000 0.8129 0.1000 0.5076 0.1000 11,165 27,300 0.000 6.120 0.000 966.180 6% 0
B 0.1000 0.2298 0.1000 0.2122 – 11,165 27,300 0.000 972.310 0.000 – 6% 0
C 0.1000 0.2533 0.1000 – 0.1000 11,165 27,300 0.000 482.700 – 489.610 6% 0
D 0.1000 0.2289 – 0.1789 0.1000 11,165 27,300 0.000 – 0.000 972.310 6% 0
E 0.1000 – 0.1000 0.2138 0.1000 11,165 27,300 – 61.480 0.000 910.830 6% 0
F 0.1000 0.2120 0.1000 – – 11,165 27,300 0.000 972.310 – – 6% 0
G 0.1000 0.2188 – 0.2125 – 11,165 27,300 281.620 – 690.690 – 6% 0
H 0.1000 0.2331 – – 0.1000 11,165 27,300 0.000 – – 972.310 6% 0
I 0.1000 – 0.1000 0.2101 – 11,165 27,300 – 972.310 0.000 – 6% 0
J 0.1000 – 0.1000 – 0.1000 11,165 27,300 – 485.990 – 486.320 6% 0
K 0.1000 – – 0.1371 0.1000 11,165 27,300 – – 0.000 972.310 6% 0
L 0.1000 0.2196 – – – 11,165 27,300 972.310 – – – 6% 0
M 0.1000 – 0.1000 – – 11,165 27,300 – 972.310 – – 6% 0
N 0.1000 – – 0.2125 – 11,165 27,300 – – 691.980 – 5% 297
O 0.1000 – – – 0.1000 11,165 27,300 – – – 972.310 6% 0

participated in the EDRP. In scenarios L–O, a single aggregate industrial
user signed the EDRP contract. Based on Intel(R) core (TM) i5-4590,
3.30 GHz CPU, 16 GB RAM, OS Windows X operation environment,
the run-time (sec) associated with 15 scenarios are between 0.0149 s and
0,0160 s with average of 0.0155.
5.3. The EDRP with a fixed price of electricity
rebates, the mission of reducing electricity consumption is concentrated
on low-value-added users (user 4 and user 2). The results in Table 4
show that TPC gives priority to providing rewards for reducing elec­
tricity consumption according to the following order: user 4 ≥ user 2 ≥
user 3 ≥ user 1. In a rational outcome, users 4 and 2 would be more
willing than users 3 and 1 to participate in the second phase of such an
EDRP.

We first focused on the incentive-based demand response that would
promote reducing electricity consumption spontaneously and achieve a
6 % operating reserve during peak periods of electricity consumption. In
this simplified program, TPC would grant rebates to the users who sign
the demand response contract without making adjustments in the
scarcity price of electricity. The results of this type of EDRP for the 15
scenarios are shown in Table 4, where the data are expressed as the
results for the average of |T| hours of the scarcity period for every user.
The scarcity price published by the power provider is 0.1 USD/kWh,
which was always set to the original price of electricity.
TPC will give different rebates according to the product value added
and the setup costs. Larger rebates would be needed to entice high-
value-added users to participate in the second phase of an EDRP and
reduce their electricity consumption. According to Table 4, the order of
the four users in terms of their average rebate is as follows: user 4 ≤ user
2 ≤ user 3 ≤ user 1 (that is, user 4′ s rebate is less than or equal to user 3′ s
rebate, and so on). This phenomenon is referred to as the users’ hierarchy
for rebates.
TPC minimizes the gap between the actual operating reserve and a 6
% operating reserve during peak periods of electricity consumption,
hence the instantaneous peak load of the system must be reduced by
972.310 kW during peak periods in order to fulfill the cooperative users’
minimum production levels. According to the users’ hierarchy for
5.4. Profits by TPC and EDRP participants in the 15 scenarios with a
fixed price of electricity
The data given in Table 5 show the profits of users that do not
participate in the EDRP (User_n), the profits of users that do participate
in the EDRP (User_ER), and TPC’s profit from executing the EDRP. The
highest profit is realized by user 4 under different scenarios. Also, the
maximum value of TPC’s profit is 2196.643 K (USD), in scenario A,
which would always be deployed instead of any of the scenarios with a
single participant. With a fixed scarcity price, TPC’s profit from
executing the EDRP rises by an amount that ranges from 0 % to 5.57 % of
its minimum profit, 2080.68 K (USD). In the short term, the participa­
tion of user 4 allows TPC to meet the goal of mitigating power shortages
and stabilizing the power supply during peak electricity consumption
periods.
5.5. Reasons for switching from a fixed scarcity price to a variable
scarcity price
At a fixed price of electricity, the users’ hierarchy for rebates is sig­
nificant in all scenarios. According to that hierarchy, the values of the Rit
calculated by TPC are concentrated on the user that is lowest in the
hierarchy. In the long term, if the users do not wish to participate in the

Table 5
Profits (thousand USD) of TPC and EDRP participants in the 15 scenarios.
Scenario User1_n User2_n User3_n User4_n User1_ER User2_ER User3_ER User4_ER Company

A 1,649,597 − 124,347 147,046 − 267,595 1,649,597 − 123,271 147,046 − 79,793 2,196,643

B 1,649,597 − 124,347 147,046 0 1,649,597 58,068 147,046 0 2,196,643
C 1,649,597 − 124,347 0 − 267,595 1,649,597 –33,600 0 − 172,426 2,159,426
D 1,649,597 0 147,046 − 267,595 1,649,597 0 147,046 − 78,602 2,159,426
E 0 − 124,347 147,046 − 267,595 0 − 113,089 147,046 − 90,552 2,159,426
F 1,649,597 − 124,347 0 0 1,649,597 58,068 0 0 2,196,643
G 1,649,597 0 147,046 0 1,649,597 0 147,046 0 2,085,489
H 1,649,597 0 0 − 267,595 1,649,597 0 0 − 78,602 2,196,643
I 0 − 124,347 147,046 0 0 58,068 147,046 0 2,196,643
J 0 − 124,347 0 − 267,595 0 –33,187 0 − 173,067 2,196,643
K 0 0 147,046 − 267,595 0 0 147,046 − 78,608 2,196,648
L 1,649,597 0 0 0 1,649,597 0 0 0 2,080,680
M 0 − 124,347 0 0 0 58,068 0 0 2,196,643
N 0 0 147,046 0 0 0 147,046 0 2,174,861
O 0 0 0 − 267,595 0 0 0 − 78,602 2,196,643

9
Y.-C. Lee et al. International Journal of Electrical Power and Energy Systems 147 (2023) 108831

second phase of the EDRP, the probability of having electricity rationing
during peak periods will increase, and the reliability will become too
low to achieve a stable power supply. Ultimately, TPC would need to
invest resources in the acquisition of more generating units.
Taking advantage of the demand response to a price that varies with
the time of use, the users’ hierarchy for rebates switches from being
significant to being nonsignificant. In a nonsignificant hierarchy, the
sizes of the reductions in electricity consumption calculated by TPC are
more evenly distributed among the users. In the long term, the reliability
of electricity with a variable scarcity price should outperform that with a
fixed price of electricity.
5.6. Results of EDRP with a variable scarcity price of electricity and
variable sizes of rebate payments in the 15 scenarios
The results for the 15 scenarios with a variable price and variable
sizes of rebate payments (and for the average of |T| hours in the scarcity
period for every user) are shown in Table 6, where it is observed that the
maximum scarcity price published by TPC is 0.1618 USD/kWh, in sce­
nario A, which is which would always be deployed instead of the orig­
inal price of electricity, 0.1 USD/kWh. With a variable scarcity price, the
increase in the scarcity price from executing the EDRP rises by an
amount that ranges from 0 % to 61.8 % of the minimum scarcity price,
0.1 USD/kWh. The scarcity price is closely related to the users’ hierar­
chy for rebates. Because of constraint (24), the scarcity price will be
determined by the user that is lowest in the users’ hierarchy for rebates;
otherwise, the scarcity price would increase in order to satisfy the
objective of maximizing TPC’s profit in the model.
In terms of the rebate payments with a variable scarcity price, the
order is always user 4 ≤ user 2 ≤ user 3 ≤ user 1. There are differences in
the significance of the hierarchy for the 15 scenarios, as shown in Fig. 3.
For instance, the range of the rebates in scenarios B, F, G, H, L, M, N, O is
larger, relatively speaking, than the range of the rebates in scenarios A,
C, D, E, I, J, K. TPC has set up constraint (24) to prevent the phenomenon
of buying low and selling high. Thus the order of the users in the users’
hierarchy for rebates will be the same as the order of the users in terms of
the scarcity price.
In terms of the reduction in electricity consumption, the order of the
users is determined by the sizes of the rebates. There is actually little
difference from one scenario to another. As shown in Table 6, a percent
operating reserve of 6 % was achieved in all but one of the 15 scenarios,
and it can be seen that this model has a significant effect on mitigating
power shortages. Only scenario N, which consists of just user 3, did not
achieve that level, because the original power consumption of user 3 was
small. Therefore, even if user 3 consumed no power, TPC would not be
able to achieve the 6 % level. It is easier for an interruptible
manufacturing class to change its electricity usage habits than for a non-
interruptible manufacturing class to do so. Thus the rebate paid to an
interruptible manufacturing class could be lower than that paid to a non-
interruptible manufacturing class. Similarly, compared to a low-value-
added manufacturing class, a high-value-added manufacturing class
should be paid slightly higher rebates.
Comparison of a fixed scarcity price of electricity to a variable
scarcity price shows that TPC is more willing to allocate different re­
ductions in electricity consumption to different users with a variable
scarcity price, which means that there are more scenarios in which the
equilibrium distribution can be achieved, as shown in Fig. 4. TPC guides
users to change their electricity consumption behavior and also in­
creases their willingness to participate in the second phase of the EDRP.
This makes it possible to steadily reduce the risk of power rationing
during peak electricity consumption periods in order to achieve the goal
of a 6 % operating reserve. In the long term, more users will be willing to
cooperate with demand responses that suppress peak loads and achieve
a stable market equilibrium.
5.7. Profits realized by TPC and EDRP participants with a variable
scarcity price
We have restricted TPC’s minimum required profit by stating that, in
every scenario, the profit realized by the power provider must be at least
as high as the power provider’s profits realized for all subsets of users in
that scenario. This can be done by setting the value of the power pro­
vider’s minimum profit serially: First, we obtained TPC’s profits in
scenarios with one user: L, M, N, and O. For scenarios with two users
(scenario F for example, which consists of users 1 and 2), the minimum
required profit for TPC was set to the maximum of TPC’s profits for the
one-element subsets of users that contain only users 1 and 2, that is,
scenarios L and M. For scenarios with three users (scenario B for
example, which consists of users 1, 2, and 3), the minimum required
profit for TPC was set to the maximum of TPC’s profits for the one- and
two-element subsets of users that contain only users 1, 2, and 3, that is,
scenarios F, G, I, L, M, and N. For the scenario with all four users, the
minimum required profit for TPC set to the maximum of TPC’s profits for
all of the other 14 scenarios. The greater the number of EDRP partici­
pants, the higher TPC’s profit. The maximum value of TPC’s profit is
4380 K (USD), in scenario A, which would always be deployed instead of
any of the scenarios with a single participant. With a variable scarcity
price, TPC’s profit from executing the EDRP rises by an amount that
ranges from 0 % to 99.4 % of the minimum profit, 2196.643 K (USD) as
shown in Table 7.
The profits realized by the four users in all 15 scenarios with a var­
iable scarcity price are shown in Fig. 5. For each user, profits of four
different types are shown there: the absolute values of the profits of the
participants (User_ER_abs), the absolute values of the profits of the non-
participants (User_n_abs), the positive profits of the participants
(User_ER), and the positive profits of the non-participants (User_n).

Table 6
Results for the 15 scenarios with a variable scarcity price.
Scenario St λ1 λ2 λ3 λ4 Qt qt R1 R2 R3 R4 POR Gt

A 0.1618 0.1645 0.1618 0.1618 0.1618 11,165 27,300 0.000 326.780 319.010 326.530 6% 0
B 0.1613 0.1637 0.1613 0.1629 – 11,165 27,300 0.000 706.050 266.260 – 6% 0
C 0.1617 0.1618 0.1617 – 0.1617 11,165 27,300 0.000 483.840 – 488.470 6% 0
D 0.1609 0.1649 – 0.1609 0.1609 11,165 27,300 94.570 – 439.020 438.720 6% 0
E 0.1608 – 0.1608 0.1608 0.1608 11,165 27,300 – 361.180 300.920 310.210 6% 0
F 0.1598 0.1638 0.1598 – – 11,165 27,300 0.000 972.310 – – 6% 0
G 0.1599 0.1651 – 0.1599 – 11,165 27,300 282.900 – 689.410 – 6% 0
H 0.1598 0.1676 – – 0.1598 11,165 27,300 0.000 – – 972.310 6% 0
I 0.1598 – 0.1598 0.1598 – 11,165 27,300 – 485.930 486.380 – 6% 0
J 0.1000 – 0.1000 – 0.1000 11,165 27,300 – 484.900 – 487.410 6% 0
K 0.1598 – – 0.1598 0.1598 11,165 27,300 – – 596.270 376.040 6% 0
L 0.1598 0.1598 – – – 11,165 27,300 972.310 – – – 6% 0
M 0.1000 – 0.1000 – – 11,165 27,300 – 972.310 – – 6% 0
N 0.1563 – – 0.1563 – 11,165 27,300 – – 691.980 – 5% 297
O 0.1000 – – – 0.1000 11,165 27,300 – – – 972.310 6% 0

10
Y.-C. Lee et al.
Fig. 3. Average rebate for users in time unit t for fixed and variable scarcity prices.
Users can achieve the estimated profit if the amount of their reduction in
electricity consumption meets the amount that was calculated and
offered by TPC. The profits of the participants (User_ER, User_ER_abs)
are higher than the profits of the non-participants (User_n, User_n_abs).
6. Conclusions
This study developed a game-theoretic model for a power provider
and industrial customers to negotiate power usage during peak periods
with proper rewards based on the users’ hierarchy for rebates in an
emergency demand response program. The model can assist a power
provider in making its decision on the scarcity price of electricity, and
heterogeneous industrial users in making decisions on their power
usage, to achieve a win–win situation. In practice, this research provides
a reasonable portfolio from different industries and rebate prices for
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International Journal of Electrical Power and Energy Systems 147 (2023) 108831
power company to participate in emergency demand response program;
and finds the best possible benefits and cooperation methods for the
industries at the same time. The results show that the proposed model
can find a Nash equilibrium point for such a situation which can also be
expressed as the policy cost of adopting the emergency demand response
program as a system resiliency measure.
A case study in Taiwan was undertaken for purposes of model vali­
dation and policy simulation, as well as general possible recommenda­
tions for EDRP, which will provide a clearer understanding of the
partnership for utilities implementing EDRP around the world. The re­
sults show that the profits of the participants in the emergency demand
response program are higher than those of the non-participants. For the
different classes of manufacturers considered, the one which is lowest in
the users’ hierarchy for rebates consists of the low-value-added inter­
ruptible manufacturers, and the one which is highest in the users’
Y.-C. Lee et al. International Journal of Electrical Power and Energy Systems 147 (2023) 108831

Fig. 4. Reduction in electricity consumption by users for fixed and variable prices.

Table 7
Profits (thousand USD) of TPC and EDRP participants in the 15 scenarios.
Scenario User1_n User2_n User3_n User4_n User1_ER User2_ER User3_ER User4_ER Company

A 1,169,664 − 205,806 104,258 − 442,895 1,169,664 − 104,167 107,818 − 339,049 4,380,000

B 1,174,060 − 205,060 104,650 – 1,174,060 10,588 107,375 – 4,360,000
C 1,170,264 − 205,705 – − 442,675 1,170,264 − 55,000 – − 287,307 4,340,000
D 1,177,030 – 104,872 − 440,204 1,177,331 – 108,946 − 301,500 4,309,090
E – − 204,507 104,898 − 440,096 – − 92,669 107,733 − 342,028 4,307,880
F 1,185,514 − 203,116 – – 1,185,514 95,567 – – 4,307,894
G 1,184,974 – 105,625 – 1,186,724 – 110,601 – 4,308,874
H 1,185,298 – – − 437,184 1,185,298 – – − 131,870 4,308,874
I – − 203,116 105,671 – – − 53,828 109,114 – 4,307,875
J – − 124,409 – − 267,729 – –33,359 – − 172,940 2,198,310
K – – 105,671 − 437,104 – – 109,891 − 319,044 4,307,875
L 1,185,553 – – – 1,185,553 – – – 4,307,874
M – − 124,347 – – – 58,068 – – 2,196,643
N – – 108,122 – – – 108,122 – 4,270,743
O – – – − 267,595 – – – − 78,602 2,196,643

12
Y.-C. Lee et al.
Fig. 5. User i_n and user i_ER profits in the 15 scenarios.
hierarchy for rebates consists of the high-value-added non-interruptible
manufacturers. The amounts of the rebates are based on the users’ hi­
erarchy for rebates and the reductions in electricity consumption on the
part of the manufacturers. However, observing equilibrium in the
required electricity reductions on the part of different manufacturers
could result in participation of a set of manufacturers which is different
from the set with the highest order in the users’ hierarchy for rebates. A
percent operating reserve of 6 % was achieved in all but one of the 15
scenarios studied, and that significantly reduced the risk of a power
shortage.
This study has some limitations. The first is the assumption that in­
dustrial users have no way of knowing the decisions made by other users
when making their own decision. The second is that the current model
does not capture the situation for users who do not participate in the
second phase of the emergency demand response program to reduce
their electricity consumption as the scarcity price of electricity changes.
Finally, the data for each user should be included as parameters of this
model. Among the possibilities for future study in this area is incorpo­
ration of the decisions and costs of building new power plants into the
current game-theoretic model to gain further insight, and the uncer­
tainty from the integration should be considered into an emergency
demand response program.
CRediT authorship contribution statement
Yu-Ching Lee: Conceptualization, Methodology, Validation, Soft­
ware, Supervision, Writing – review & editing. Hsin-Wei Hsu:
Conceptualization, Methodology, Validation, Investigation, Resources,
Supervision, Writing – review & editing, Project administration. Yen-
Chang Chang: Software, Formal analysis, Data curation, Writing –
original draft, Visualization. Ying-Lien Chen: Software, Formal anal­
ysis, Data curation, Writing – original draft, Visualization, Validation,
Resources, Supervision, Project administration. Ming-Chuan Chiu:
Validation, Resources, Supervision, Project administration.
13
International Journal of Electrical Power and Energy Systems 147 (2023) 108831
Declaration of Competing Interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Data availability
Data will be made available on request.
Acknowledgements
The authors would like to thank the Ministry of Science and Tech­
nology of the Republic of China, Taiwan for financially supporting this
research under Contract no. MOST 109-2628-E-007 -002 -MY3 and
MOST 109-2221-E-033 -039 -MY3.
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