Peer-to-peer energy trading framework for smart grids using game theory approaches

Abstract

The concept of a peer-to-peer (P2P) energy trading system is becoming popular. Individuals will be capable of both consuming and producing energy without the need for centralized power plants. However, the integration of renewable energy in today’s power grid remains challenging. The emerging smart grid technology will have to be built on mathematical tools such as game theory. The benefit of peer- to-peer energy trading to the distribution grid needs to be considered. If demand goes below the load demand of the grid, then how does the grid decide on its price lower than the P2P price that enables it to sell its energy to the prosumers is another issue. Another challenge is that the negotiation process can become more complicated for the scenario where a higher number of end users are involved, as both the seller and the buyer are unaware of each other’s requirements and priorities. So we have proposed a new model where end users can trade surplus energy with other consumers and the grid using the grid-connected distribution network, which ensures a collective minimization of energy cost and potentially maximizes profits. The grid can impose some constraints to decide when the end-user can participate in P2P energy trading. We have proposed a hybrid framework, including a cooperative coalition formation game and the Stackelberg game. The choice of the price is made by the grid, prosumers, and consumers in the coalition formation game and participate in P2P energy trading with the neighboring peers of the same coalition. We have added a non-cooperative pregame in which coalitions are formed and then simultaneously energy trading occurs both cooperatively and non-cooperatively based on the calculation of the maximum utility and minimum cost. We have analyzed various properties of the resulting game. In particular, it is shown that, due to the strategy-proof property of the formed coalitions’ stability, the proposed game possesses a unique Stackelberg equilibrium. We derive a closed-form pricing function for the grid and propose an algorithm that the grid and prosumers can use to solve it. Further, using numerical simulation, we demonstrate the beneficial properties of the proposed scheme.