Game Theoretical Formulation for Residential Community Microgrid via Mean Field Theory: Proof of Concept

Incentive-based demand response aggregators are widely recognized as a powerful strategy to increase the flexibility of residential community MG (RCM) while allowing consumers’ assets to participate in the operation of the power system in critical peak times. RCM implementing demand response approaches are of high interest as collectively, they have a high impact on shaping the demand curve during peak time while providing a wide range of economic and technical benefits to consumers and utilities. The penetration of distributed energy resources such as battery energy storage and photovoltaic systems introduces additional flexibility to manage the community loads and increase revenue. This letter proposes a game theoretical formulation for an incentive-based residential community microgrid, where an incentive-based pricing mechanism is developed to encourage peak demand reduction and share the incentive demand curve with the residential community through the aggregator. The aggregator’s objective is to maximize the welfare of the residential community by finding the optimal community equilibrium electricity price. Each household communicates with each other and with the distributed system operator (DSO) through the aggregator and aims to minimize the local electricity cost.