Pricing games among interconnected microgrids

Abstract

We consider a scenario with multiple independent microgrids close to each other in a region that are connected to each other and to the central grid (macrogrid). In each time slot, a given microgrid may produce more than, less than or as much power as it needs, and there is uncertainty on which of these events may occur. The microgrids with excess power, those with deficit power and the macrogrid trade power in an electricity market, in which each microgrid with excess power quotes a price for it and the microgrids with deficit power buy power from the microgrids who quote the lowest prices. This results in price competition among the microgrids with excess power, and this competition has several distinguishing features not normally present in price competition in traditional markets studied in economics. We analyze this price competition using the framework of game theory, explicitly compute a Nash Equilibrium and show its uniqueness.