Bilateral Contract Networks for Peer-to-Peer Energy Trading

Abstract

This paper proposes bilateral contract networks as a new scalable market design for peer-to-peer energy trading. Coordinating small-scale distributed energy resources to shape overall demand could offer significant value to power systems, by alleviating the need for investments in upstream generation and transmission infrastructure, increasing network efficiency and increasing energy security. However, incentivising coordination between the owners of large-scale and smallscale energy resources at different levels of the power system remains an unsolved challenge. This paper introduces real-time and forward markets, consisting of energy contracts offered between generators with fuel-based sources, suppliers acting as intermediaries and consumers with inflexible loads, timecoupled flexible loads and/or renewable sources. For each type of agent, utility-maximising preferences for real-time contracts and forward contracts are derived. It is shown that these preferences satisfy full substitutability conditions essential for establishing the existence of a stable outcome-an agreed network of contracts specifying energy trades and prices, which agents do not wish to mutually deviate from. Important characteristics of energy trading are incorporated, including upstream-downstream energy balance and forward market uncertainty. Full substitutability ensures a distributed price-adjustment process can be used, which only requires local agent decisions and agent-to-agent communication between trading partners.

Quantifying Market Efficiency Impacts of Aggregated Distributed Energy Resources

“…In this section, we mathematize this interaction between A and the prosumers in N as a Stackelberg game (see Figure 1). 2 Later in this work, we explore how the outcomes of this game impact wholesale market efficiency.…”

“…More generally, a DER is "any resource on the distribution system that produces electricity and is not otherwise included in the formal NERC definition of the Bulk Electric System (BES)" [1]. The low-voltage side of the grid, traditionally comprising mostly of passive small-scale consumers, is rapidly transforming into an active component of the grid where prosumers respond to price signals for managing their consumption and production of energy [2].…”

A P2P-Dominant Distribution System Architecture

“…there is no incentive to deviate from the cleared transactions unless the availability of producers or demand of consumers change. To obtain a stable match, we leverage the recent result by Morstyn et al [8] that exploits the concept of full substitutability [11], which ensures that a decentralized price-adjustment process can be performed based on local information available to the peers and only requires communication between the peers engaged in trade ω. Since the peer-centric configuration requires no central coordinator (e.g.…”

“…The literature on P2P interactions in distribution systems is thin and still emerging. Morstyn et al [8]- [10] leverage the concept of full substitutability [11], i.e. an equilibrium condition for peers in a hierarchical supply chain, to develop a bilateral contract network for P2P energy trading.…”

A motivational game-theoretic approach for peer-to-peer energy trading in the smart grid

“…Examples of such studies can be found in [20], [31] and [18]. In [20], the authors introduce real-time and forward markets, consisting of energy contracts offered between generators with fuel-based sources, for incentivizing coordination between the owners of large-scale and small-scale energy resources at different levels of the power system. An evolutionary game-theoretic approach and a Stackelberg game are used in [31] for modeling the dynamics of buyers and seller to capture their interactions in a P2P energy network.…”