Incentivizing Demand-Side Response Through Discount Scheduling Using Hybrid Quantum Optimization

Abstract

Demand-side response (DSR) is a strategy that enables consumers to actively participate in managing electricity demand. It aims to alleviate strain on the grid during high demand and promote a more balanced and efficient use of (renewable) electricity resources. We implement DSR through discount scheduling, which involves offering discrete price incentives to consumers to adjust their electricity consumption patterns to times when their local energy mix consists of more renewable energy. Since we tailor the discounts to individual customers' consumption, the discount scheduling problem (DSP) becomes a large combinatorial optimization task. Consequently, we adopt a hybrid quantum computing approach, using D-Wave's Leap Hybrid Cloud. We benchmark Leap against Gurobi, a classical mixed-integer optimizer, in terms of solution quality at fixed runtime and fairness in terms of discount allocation. Furthermore, we propose a large-scale decomposition algorithm/heuristic for the DSP, applied with either quantum or classical computers running the subroutines, which significantly reduces the problem size while maintaining solution quality. Using synthetic data generated from real-world data, we observe that the classical decomposition method obtains the best overall solution quality for problem sizes up to 3200 consumers; however, the hybrid quantum approach provides more evenly distributed discounts across consumers.