Strategic trading equilibria in local community considering co-existence of pool-based and peer-to-peer energy markets with free-rider problem in network usage cost

Abstract

The peer-to-peer (P2P) energy trading market is considered a promising method for allocating prosumers’ locally produced power in smart buildings. However, the existing literature overlooks the coexistence of P2P and pool-based energy markets. Therefore, this paper establishes a bi-level energy market model that incorporates both P2P and pool-based markets. The prosumers’ individual profit maximization model considering their network usage costs in the P2P energy trading network at the upper level is first developed. A hybrid market-clearing framework determining the optimal trading amounts with the prosumers’ strategic offers at the lower level is then exploited. The distribution network power flow model in the market clearing framework is then convexified. The lower-level problem is replaced with its strong duality conditions. This bi-level problem can be reformulated as an equilibrium problem with equilibrium constraints (EPEC). This EPEC is then solved after being transformed into an equivalent mixed integer linear programming (MILP) model. Finally, a fifteen-bus system is employed to illustrate the characteristics of the hybrid market equilibrium depicted by this EPEC model. The influences of the prosumers’ strategic offers on the distribution locational marginal prices (DLMPs) and network usage costs are highlighted. Since the prosumers can choose to transmit their energy in the pool-based or P2P markets, the emission and pollution costs caused by power transmission can be minimized. A cleaner energy production is thus guaranteed. The free-rider problem is verified by comparing the network usage charges in the strategic and perfect competition scenarios.