An Auction Mechanism for Profit Maximization of Peer-to-Peer Energy Trading in Smart Grids

Abstract

In this paper, we propose an optimization technique applying an auction-based mechanism for peer-to-peer energy trading in a smart grid. In our proposed system model we have assumed proper infrastructure and communication to allow connected users to trade energy in a peer-to-peer fashion. The mechanism requires complete knowledge of the different constraints tied to the grid infrastructure such as the status of the paths connecting the suppliers and consumers. This view on the underlying infrastructure is imperative not only to prevent power losses and over utilization of the power lines but also to factor the cost of energy transfer in the trading process. We investigate a sealed bid auction model where each player can participate in the bidding process to maximize its benefit according to current and future energy availability, price variations, the distance between traders and energy transfer costs. The evaluation of the proposed model is examined through theoretical analysis as well as experimental results. This work further demonstrates a profit maximization algorithm (PMA) for energy suppliers which generates high profit return.