Incentive-based demand response modeling in a day-ahead wholesale electricity market in Japan, considering the impact of customer satisfaction on social welfare and profitability

Incentive-based demand response programs (IBDRPs) are voluntary programs that encourage customers (CUs) to cut their electricity usage during peak periods, in return for receiving incentives from the service provider (SP). This research addresses a comprehensive multi-objective modeling approach, based on maximizing the social welfare function of both SPs and CUs involved in the IBDRPs, considering both the economic drivers and the social factors affecting the market actors. The social aspect of the CUs’ participation in the IBDRPs is evaluated with respect to their satisfaction with the intangible benefits, which cannot be measured in monetary terms. To this aim, a Kano model for customer satisfaction is developed to estimate the level of CUs’ satisfaction with participation in the IBDRPs, taking into account the impact of the four attributes of comfort, flexibility, energy security, and environmental protection. The model then analyzes the proposed IBDRP implemented in the Japan Electric Power Exchange (JEPX) market, using real-time wholesale electricity prices and demand loads in the Tokyo residential areas. The results revealed that, the environmental protection attribute could more positively impact the CUs’ satisfaction level; consequently, their welfare is higher with more reduction in electricity from incentive incomes.