A game-theoretic, market-based approach to extract flexibility from distributed energy resources

TL;DR

This paper introduces a game-theoretic market framework that enables optimal utilization of distributed energy resources' flexibility through strategic bidding and pricing, ensuring efficient power injection regulation.

Contribution

It develops a novel market design using game theory with analytical solutions, ensuring unique equilibria for flexible resource management in power systems.

Findings

Existence and uniqueness of Nash and Stackelberg equilibria.

Analytical closed-form solutions for market equilibrium.

Simulation results demonstrating effective flexibility extraction.

Abstract

We propose a market designed using game theory to optimally utilize the flexibility of distributed energy resources (DERs) like solar, batteries, electric vehicles, and flexible loads. Market agents perform multiperiod optimization to determine their feasible flexibility limits for power injections while satisfying all constraints of their DERs. This is followed by a Stackelberg game between the market operator and agents. The market operator as the leader aims to regulate the aggregate power injection around a desired value by leveraging the flexibility of their agents, and computes optimal prices for both electricity and flexibility services. The agents follow by optimally bidding their desired flexible power injections in response to these prices. We show the existence and uniqueness of a Nash equilibrium among all the agents and a Stackelberg equilibrium between all agents and the operator. In addition to deriving analytical closed-form solutions, we provide simulation results for a small example system to illustrate our approach.