On Incentive Compatibility of Deadline Differentiated Pricing for Deferrable Demand

A large fraction of the total electric load is comprised of end-use devices whose demand is inherently deferrable in time. While this latent flexibility in demand can be leveraged to absorb variability in supply from renewable generation, the challenge lies in designing incentives to induce the desired response in demand. In the following, we study a novel forward market, where consumers consent to deferred service of pre-specified loads in exchange for a reduced per-unit price for energy. The longer a customer is willing to defer, the larger the reduction in price. The proposed deadline-differentiated forward contract provides a guarantee on the aggregate quantity 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 differentiated prices yielding an efficient competitive equilibrium between supply and demand. We also show that such prices are incentive compatible (IC) in that every consumer would like to reveal her true deadline type to the supplier, provided that the other consumers are truth-telling.