Quantifying Market Efficiency Impacts of Aggregated Distributed Energy Resources

TL;DR

This paper analyzes how aggregating distributed energy resources affects market efficiency, considering the strategic behavior of profit-maximizing aggregators and the stochastic nature of DER supply, using a game-theoretic approach.

Contribution

It introduces a game-theoretic model to quantify efficiency impacts of DER aggregation, accounting for strategic incentives and supply uncertainty.

Findings

Efficiency loss increases with DER integration and supply uncertainty.

Strategic behavior of aggregators can significantly reduce market efficiency.

Numerical results demonstrate the trade-offs between DER deployment and market performance.

Abstract

We focus on the aggregation of distributed energy resources (DERs) through a profit-maximizing intermediary that enables participation of DERs in wholesale electricity markets. Particularly, we study the market efficiency brought in by the large-scale deployment of DERs and explore to what extent such benefits are offset by the profit-maximizing nature of the aggregator. We deploy a game-theoretic framework to study the strategic interactions between an aggregator and DER owners. The proposed model takes into account the stochastic nature of the DER supply. We explicitly characterize the equilibrium of the game and provide illustrative examples to quantify the efficiency loss due to the strategic incentives of the aggregator. Our numerical experiments illustrate the impact of uncertainty and amount of DER integration on the overall market efficiency.