Analysis of Peer-to-Peer Energy Trading in a Dynamic Environment Using Stackelberg Game

Abstract

Peer-to-Peer (P2P) energy trading is the direct sharing of energy between grid-connected users. An efficient P2P energy trading platform paves way for sustainable development since it encourages more generation from renewables locally. Setting up a new P2P platform and bringing that to a successful one is challenging due to technical, economic and social factors. In this paper, we focus on the economic aspect of this challenge. We propose a novel model of P2P trading by which a policymaker can choose whether to encourage more local generation or consumption. We model the P2P energy trading as a single leader multiple follower Stackelberg game with the auctioneer or the policymaker as the single leader, and the prosumers (producer + consumer) as the followers. Depending on the bids submitted by the sellers (producers) and buyers (consumers), the auctioneer using double auction determines the winners for trading. For the winners, the auctioneer fixes a price maximizing the average social welfare of prosumers, and the prosumers decide their quantities maximizing their welfare functions. We show the existence and uniqueness of Stackelberg equilibrium in such a scenario. We also propose an algorithm to find the Stackelberg equilibrium price and quantities. We consider different test cases to analyze the existence of the Stackelberg equilibrium and the effect of the equilibrium on P2P energy trading.