Optimal Bidding Strategy of Prosumers in Distribution-Level Energy Markets

Abstract

This paper develops a systematic approach to derive the optimal bidding strategy for prosumers in a distribution-level energy market. In particular, the optimal bidding curve describes the cost-minimizing buying/selling strategy of prosumers and is composed of a limited number of linear segments. As such, only a small number of end points of the linear segments are sufficient to exactly describe the optimal bidding curve. This not only guarantees the optimality of bidding decisions, but also greatly reduces the computation and communication overhead compared with existing sampling-based approaches. By leveraging the proposed systematic bidding strategy, we propose a novel market clearing scheme for the distribution system operator (DSO) to coordinate the energy transaction among prosumers in a local distribution area (LDA). Specifically, when all prosumers, either grid-connected or isolated, follow the proposed optimal bidding strategy, the DSO is able to achieve a global optimal distributed energy resource (DER) dispatch in a decentralized manner. We verify the proposed bidding strategy and market clearing scheme in two practical scenarios, i.e., a prosumer with 34 buses in a distribution-level energy market and an LDA with four 13-bus microgrids. Numerical results demonstrate the superior performance of our proposed approach compared with other benchmarks.