Enhancing Transactive Energy Trading Framework for Residential End Users

Abstract

The rapid advancement of technologies related to economically viable energy resources, energy storage methods, and innovative loads such as electric vehicles, combined with significant progress in communication and computation technologies, has given rise to the smart grid paradigm. This paradigm presents an opportunity to establish a Transactive Energy System (TES), a sustainable, efficient, and cost-effective business model offering end users a diverse range of affordable energy services. However, sustained stability of the TES heavily depends on the active participation, consistency, and incentive compatibility of credible end users with reduced penalty, unlike in the wholesale market. The primary challenge lies in designing an economically efficient transactive energy market clearing mechanism that considers uncertainties in end users’ energy behavior and incentivizes their credible engagement with reducing penalties. To address these overlooked challenges, this work proposes innovative approaches involving market power mitigation, credit rating-based incentives, incentive compatibility, and penalty-based methods rooted in cooperative principles. The strategy aims to minimize penalties for end users while encouraging credible engagement by offering significant savings on their electricity bills. To validate the effectiveness of this methodology, several case studies were conducted involving multiple household end users within a locality. The outcomes are highly promising, showing monthly savings of 20.67%, 19.85%, 27.81%, and 73.46% on electricity bills for participating households in contrast to the current TES. The tangible results highlight the significant impact attainable by employing the suggested market clearing approach and showcase enhanced savings for end users.

Keywords

• Demand side management
• incentive compatibility
• market power
• penalty mechanism
• prosumer
• transactive energy system