An Incentive-compatible Energy Trading Framework for Neighborhood Area Networks with Shared Energy Storage

TL;DR

This paper introduces an incentive-compatible energy trading framework for neighborhood networks with shared storage, optimizing revenue and social cost through a Stackelberg game and mechanism design, leading to significant peak demand reduction.

Contribution

It proposes a novel Stackelberg game-based energy trading system with mechanism design to ensure incentive compatibility and achieve a unique equilibrium in NANs with shared storage.

Findings

28%-45% peak demand reduction demonstrated

System incentivizes truthful energy usage disclosure

Retailer benefits financially alongside SES and users

Abstract

Here, a novel energy trading system is proposed for demand-side management of a neighborhood area network (NAN) consisting of a shared energy storage (SES) provider, users with non-dispatchable energy generation, and an electricity retailer. In a leader-follower Stackelberg game, the SES provider first maximizes their revenue by setting a price signal and trading energy with the grid. Then, by following the SES provider's actions, the retailer minimizes social cost for the users, i.e., the sum of the total users' cost when they interact with the SES and the total cost for supplying grid energy to the users. A pricing strategy, which incorporates mechanism design, is proposed to make the system incentive-compatible by rewarding users who disclose true energy usage information. A unique Stackelberg equilibrium is achieved where the SES provider's revenue is maximized and the user-level social cost is minimized, which also rewards the retailer. A case study with realistic energy demand and generation data demonstrates 28\%~-~45\% peak demand reduction of the NAN, depending on the number of participating users, compared to a system without SES. Simulation results confirm that the retailer can also benefit financially, in addition to the SES provider and the users.