A pricing strategy based on potential game and bargaining theory in smart grid

Abstract

Abstract In this paper, a two‐stage pricing framework is proposed for the electricity market which is consisted of a generation company (GC), multiple electric utility companies (EUC) and consumers. In the electricity wholesale market, the EUCs will choose an agent to negotiate the wholesale price with GC. An appropriate wholesale price plays an important role in the stable operation of the electricity wholesale market. However, it is challenging to find the optimal wholesale price. Therefore, the Raiffa‐Kalai‐Smorodinsky bargaining solution (RBS) is applied to realize the pricing equilibrium which is 0.3$/KWh. In the electricity retail market, this study designs a retail pricing strategy based on the potential game, which can optimize both social welfare and the benefit of the EUCs. Moreover, the impact of demand disturbance on the benefit of the EUCs and GC is studied in the electricity retail market. Then an iterative pricing algorithm is proposed for the two‐stage pricing model. The simulation results reveal that the demand disturbance has little effect on the benefit of the EUCs and GC, indicating the reliable/promising robustness of the algorithm.

Keywords

• Optimisation techniques
• Systems theory applications in economics and business
• Game theory
• Optimisation techniques
• Game theory
• Power system management, operation and economics