Machine to Machine (M2M) Communications for Dynamic Pricing in Smart Grid Networks

Abstract

Smart grid (SG) networks are characterized by a tight integration of a flexible and secure communications network supporting a very large number of sensor and actuator nodes. This communication network is vital in learning about the power consumption patterns of consumers and finding out the statistical characteristics of power sources. With the accurate information, the smart grid can plan, support and interact with consumers in a more efficient and economical way. In order to realize the intelligent electricity network, machine-to-machine (M2M) communication is considered as a core building block for the SG enabling the deployment of a wide-scale monitoring and control infrastructure. The integration of machine to machine communications in the grid network eliminates human related errors by automating the processes of reading and reloading of utility meters, collecting information on customer usage patterns and instantaneously informing the utility companies in case of any faults and/or outages in the network. M2M communications enables new applications in the smart grid including smart metering and dynamic pricing of power in the grid. Smart metering in M2M facilitates flexible demand management
where a smart meter measures consumption and communicates that information back to the local utility. Dynamic pricing is used to control
power demand in response to fluctuation in power supply. When the power demand from customers is higher than the power production
output, the utility provider needs to source for additional power supply from other sources such as diesel operated power plants which are
more expensive and harmful to the environment, whereas, when the power demand is too low, the operator may suffer from an underutilized
infrastructure leading to wasted capacity. M2M communications enables the effecting of dynamic pricing structures whereby customers are charged higher rates during peak hours to discourage much consumption and charged lower rates during off-peak hours to encourage consumption. The different levels of tariffs allow the consumer to make a smarter and more responsible choice and can be used as one of the mechanisms of effecting load balancing which is a very big hurdle in existing grid networks. In this paper, we discuss the application of M2M communications to the SG to achieve dynamic pricing structures. We also explore the challenges and opportunities achieved from the dynamic pricing in the smart grid.