A High-Efficiency and Incentive-Compatible Peer-to-Peer Energy Trading Mechanism

Due to the rapid development of demand response management and distributed energy resources, prosumers are becoming more proactive, which also promotes the emergence of peer-to-peer (P2P) energy trading mechanisms. However, we find that it is quite difficult to simultaneously achieve high computational efficiency, decentralized operations and solution optimality in a P2P energy trading mechanism, which is called the “P2P energy trading trilemma”. In this paper, we first propose a novel negotiation mechanism for P2P energy trading that can maximize social welfare in a decentralized manner and respect physical network constraints. Then, the local optimization problem is transformed into a closed-form alternating update algorithm (AUA), so that the computational efficiency can be greatly improved. Therefore, our proposed mechanism solves the “P2P energy trading trilemma” to a certain extent. Another challenge is that the locational marginal price (LMP)-based market mechanism cannot satisfy the incentive-compatible property. To encourage prosumers to cooperate in a lack-of-trust environment, a novel incentive-compatible mechanism is proposed for P2P energy trading using consensus mechanism inspired by proof of solution (PoSo) and smart contract (SC). Finally, we simulate the functionality of the mechanism in terms of convergence performance, reliability, scalability, computational efficiency, and SC operations.