Peer-to-Peer Energy Trading: Energy Pricing Using Game Theory Models

Abstract

Peer-to-peer (P2P) energy trading facilitates the trading of a prosumer's surplus generated energy from the Distributed Energy Resource (DER) to the neighbouring prosumer having an energy deficit. Its primary aim is to reduce consumers' energy prices, increase DER owners' revenue and incentivise them for energy trading. Mid market rate, supply demand ratio and bill sharing are the established pricing mechanisms in this paradigm. Despite having wide implementations of existing pricing mechanisms, they fail to provide fair and optimal energy prices. Also, they do not incorporate factors like participating prosumers' conflicting interests; innate human behaviour like fair, selfish, or greedy nature; and their contradictory trading strategies. Game theory determines energy prices by incorporating these factors. It reduces system costs and encourages prosumers to trade in the local electricity market. Hence, various game theoretic models have been proposed for different P2P energy trading mechanisms. However, a systematic study to comprehend the applicability of various models to this trading paradigm is necessitated. It is required with a view to identify and design appropriate price determination models for varying trading conditions. This review paper delivers an overview of P2P trading, fundamentals of game theory, models used for energy price determination and identification of further research directions implementing game theory in this energy trading.