The effect of altruism in automated demand response for residential users

Automated demand response (ADR) programs play key role in alleviating the supply and demand imbalances by mitigating the uncertainties on power system operations in an automated (pre-contracted) way. Usually users are taken as fully rational. However, behavioural economics contend that their decisions depend on a suite of individual non-economic factors, such as altruism. In this work we broaden the ways of engaging in ADR contracts users exhibiting different degrees of altruism and motivate them effectively to ultimately optimize the overall use of energy. We investigate the impact of altruism on the total incentives to be offered by the provider and the social welfare, and identify the optimal demand reduction and user targeting strategies for performing ADR in such populations. Based on experiments with real and synthetic data, we find that exploiting altruism can be beneficial for the social welfare of the system and the incentive costs of the provider. However, leveraging altruists should be performed carefully, since saddling them with high power reductions, although yielding lower total incentives, can prove inefficient for the social welfare of the system.