Double-Sided Auction Mechanism for Peer-to-Peer Energy Trading Markets

Abstract

The emerging smart grid uniquely combines two-way communication and energy flow, allowing consumers to become active participants in market-based energy supply and demand strategies. In such a market, Peer-to-Peer (P2P) energy trading paradigm allows local communities and individuals who generate electricity to freely decide how and with whom they are going to trade it. The greatest challenge of P2P energy trading is how to design efficient mechanisms among rational participants that maximize their monetary benefits. Furthermore, since utility companies own the transmission lines, a key question that yet to be addressed in P2P markets is: how to match between different energy buyers and sellers while taking into account the physical constraints of the underlying grid infrastructure, e.g., capacity, congestion, and line transmission costs. This paper proposes a novel double-sided auction mechanism with a matching algorithm that addresses the aforementioned challenges. In this paper, the social welfare of the participants is modeled as an optimization problem with cost constraints incurred due to energy generation, operating and maintenance, capacity, and line transmission costs. The study provides theoretical analysis of the P2P auction model including mechanism design properties such as individual rationality, computational efficiency, and truthfulness. The results of the experiments indicate that the proposed auction model outperform existing systems and yields better economic incentives for participants.