Abstract
The next generation power system, known as the smart grid, is viewed as a key enabler for effectively delivering electricity to customers in a sustainable manner. The primary goal of this research is to develop new energy management mechanisms that properly account for the decisions and control processes at the side of both customers and utility companies in the smart grid. While there has been considerable recent works on demand-side management, storage units integration, and related ideas, most existing works are based on classical game-theoretic concepts such as static noncooperative games and do not account for the real-world user behavior and its impact on the operation of the smart grid and of energy markets. Indeed, most of the existing models proposed so far are based on the ideal assumption that grid customers can make rational and perfect decisions. In this thesis, we propose a novel approach based on behavioral game theory that can serve as a framework for capturing realistic user behavior in smart grid energy management. Taking such realistic decision-making settings into account allows us to go beyond classical game-theoretic concepts in order to explore how a user perceives the actions of its opponents and how this user evaluates its own utility function.In particular, we adopt the mathematical tools expounded by the Nobel-prize winning framework of prospect theory (PT), to study the decisions made by grid users and their impact on energy management.