Peer-to-Peer Electricity Market Analysis: From Variational to Generalized Nash Equilibrium

TL;DR

This paper compares centralized and peer-to-peer electricity markets, characterizing equilibria and analyzing how prosumer preferences influence trade structures, congestion, and energy waste, with insights from theoretical and realistic network examples.

Contribution

It introduces a variational equilibrium framework for peer-to-peer markets and proves its equivalence to social welfare optimization, providing new insights into trade structures and preferences impact.

Findings

Variational equilibria coincide with social welfare optima.

Preferences significantly affect network congestion and renewable energy waste.

One variational equilibrium is proven to be optimal.

Abstract

We consider a network of prosumers involved in peer-to-peer energy exchanges, with differentiation price preferences on the trades with their neighbors, and we analyze two market designs: (i) a centralized market, used as a benchmark, where a global market operator optimizes the flows (trades) between the nodes, local demand and flexibility activation to maximize the system overall social welfare; (ii) a distributed peer-to-peer market design where prosumers in local energy communities optimize selfishly their trades, demand, and flexibility activation. We first characterizethe solution of the peer-to-peer market as a Variational Equilibrium and prove that the set of Variational Equilibria coincides with the set of social welfare optimal solutions of market design (i). We give several results that help understanding the structure of the trades at an equilibriumor at the optimum. We characterize the impact of preferences on the network line congestion and renewable energy waste under both designs. We provide a reduced example for which we give the set of all possible generalized equilibria, which enables to give an approximation of the price ofanarchy. We provide a more realistic example which relies on the IEEE 14-bus network, for which we can simulate the trades under different preference prices. Our analysis shows in particular that the preferences have a large impact on the structure of the trades, but that one equilibrium(variational) is optimal.