Pricing Mechanism for Community Prosumers in Decentralized Electricity Market

A novel pricing mechanism for peer-to-peer (P2P) energy trading among the community prosumers is proposed. The prosumers are composed of the sellers with surplus energy and the buyers with insufficient energy. The buyers can adjust the energy consumption behavior based on the price and quantity of the energy supplied by the sellers. Two separate competitions exist in the trading process: 1) the competition of price among the sellers; and 2) the competition of seller selection among the buyers. The price competition among sellers is modeled on the basis of optimal supply response. Based on the optimal demand response, the modeling for buyers' dynamic behaviors is used to select sellers and decide the trading quantity. Furthermore, the Stackelberg game is used to analyze the interaction between the buyers act as followers and sellers act as leaders. P2P optimal pricing is achieved by maximizing social welfare. The proposed method is applied to small community prosumers with distributed energy resources (DERs). Simulation results show that the proposed P2P energy pricing mechanism can provide significant financial benefits for the community. First, with the increase of demand, the created welfare flows to the seller as the supply is lower than the demand. Second, as the supply is exceeding the demand, the created welfare with the increase of DERs supply flows to the buyer as the DERs supply is lower, and flows to the buyer and seller as the DERs supply is higher. The results also demonstrate that: the higher the adoption of DERs, the higher the social welfare.