Social Welfare in Battery Charging Games

TL;DR

This paper models the strategic charging and discharging of household batteries in renewable energy grids using game theory, analyzing how pricing influences equilibria and social welfare to inform better market designs.

Contribution

It introduces a game-theoretic framework for battery charging decisions in renewable energy markets, analyzing equilibrium existence and social welfare under various pricing strategies.

Findings

Equilibrium existence depends on pricing strategies.

Social welfare varies significantly with different pricing.

Market design impacts grid stability and efficiency.

Abstract

The recent rise of renewable energy produced by many decentralized sources yields interesting market design challenges for electrical grids. Balancing supply and demand in such networks is both a temporal and spatial challenge due to capacity constraints. The recent surge in the number of household-owned batteries, especially in regions with rooftop solar adoption, offers mitigation potential but often acts misaligned with grid-level objectives. In fact, the decision to charge or discharge a household-owned battery is a strategic choice by each battery owner governed by selfish incentives. This calls for an analysis from a game-theoretic point of view. We initiate this timely research direction by considering a game-theoretic setting where selfish agents strategically charge or discharge their batteries to increase their profit. In particular, we study a Stackelberg-like market model where a third party introduces price incentives, aiming to optimize renewable energy utilization while preserving grid feasibility. For this, we study the existence and the quality of equilibria under various pricing strategies. We find that the existence of equilibria crucially depends on the chosen pricing and that the obtained social welfare varies widely. This calls for more sophisticated market models and pricing mechanisms and opens up a rich field for future research in Algorithmic Game Theory on incentives in renewable energy networks.