Distributed Energy Trading in Microgrids: A Game-Theoretic Model and Its Equilibrium Analysis

Abstract

This paper proposes a distributed mechanism for energy trading among microgrids in a competitive market. We consider multiple interconnected microgrids in a region where, at a given time, some microgrids have superfluous energy for sale, or to keep in storage facilities, whereas some other microgrids wish to buy additional energy to meet local demands and/or storage requirements. Under our approach, the sellers lead the competition by independently deciding the amount of energy for sale subject to a trade-off between the attained satisfaction from the received revenue and that from the stored energy. The buyers follow the sellers' actions by independently submitting a unit price bid to the sellers. Correspondingly, the energy is allocated to the buyers in proportion to their bids, while the revenue is allocated to the sellers in proportion to their sales. We study the economic benefits of such an energy trading mechanism by analyzing its hierarchical decision-making scheme as a multi-leader multi-follower Stackelberg game. We show that distributing the energy based on a well-defined utility function converges to a unique equilibrium solution for maximizing the payoff of all participating microgrids. This game-theoretic study provides an incentive for energy trading among microgrids in the future power grid.

Evaluation of Demand-Side Management over Pricing Competition of Multiple Suppliers Having Heterogeneous Energy Sources

“…In this sense, there is a broker between the suppliers and the consumers who aggregates demand from all consumers and makes demand requests to suppliers based on the consumers' decisions. It should be noted that the broker concept is widely used in electric power market models to manage energy distribution, as in [4,5]. Here, the total amount of requested demand required to support the whole population is denoted by d req .…”

“…The logarithm term is the consumers' gain from satisfaction in using a certain amount of electricity. Note that a logarithmic utility function is generally utilized to measure user's satisfaction with diminishing returns [4][5][6]. In this study, the total requested demand for electricity is defined as a constant.…”

“…This evolution can be achieved by integrating modern communication technologies and innovations in distributed generation from renewable energy sources. Such systems are known as smartgrids [4][5][6]. Balancing demand and supply in a smartgrid has proved to be a challenge because of the highly variable, unpredictable, and intermittent nature of energy generation from renewable sources [4].…”

A local electricity trading market: Security analysis

“…The authors showed that such direct trading of electricity could be beneficial for both sellers and buyers, as the price of the electricity traded directly lies between the wholesale and retail price. Lee et al [7] proposed a distributed model for electricity trading among microgrids in a competitive market. Under their approach, sellers lead the competition by independently deciding the amount of electricity for sale, whereas buyers follow the sellers' actions by independently submitting a unit price bid to the sellers.…”

“…Several papers [5]- [7] have proposed market models which allow users to negotiate a price and sell their excess electricity to different suppliers. These models are good for RES owners as the users can potentially increase their revenues by selling electricity at a higher price.…”