A Game Theoretic Approach to a Retail Electricity Market with a High Penetration of Small and Mid-Size Renewable Suppliers

Abstract

Game theory has provided a practical tool to model players’ strategic behavior in electricity markets. In this work, a retail electricity market with a high penetration of renewable resources is modeled. Using game theory, the hourly clearing electricity prices, as well as the optimum behavior of market participants are obtained. In this model, which is inspired by the “Energy Internet” concept, consumers play an active role in managing their load demands. This highly dynamic model allows us to analyze consumers’ reaction to price fluctuations. Spot pricing, which is employed here to model the electricity market, can make consumers react to the high electricity prices. This is particularly important in the demand side management, where consumers should modify their demand through financial incentives. Two types of active players are considered in this electricity market: small electricity suppliers and consumers. Electricity grid acts as an Independent system operator and is considered to be a complementary unit to compensate for the deficiency of power from small suppliers. The problem is formulated mathematically and a design of experiment (DOE) approach is employed to find the rational reaction set (RRS) of market participants. The intersection of these sets provides the Nash Equilibrium.