An Incentive-Compatible Energy Trading Framework for Neighborhood Area Networks With Shared Energy Storage

TLDR

The study introduces an incentive‑compatible energy trading framework for a neighborhood area network with shared energy storage that rewards users for truthfully disclosing energy usage. The framework employs a leader‑follower Stackelberg game in which the storage provider first sets a price signal to maximize revenue, and the retailer then minimizes social cost by following that signal, using a mechanism‑design pricing strategy. The resulting equilibrium maximizes storage revenue, minimizes user social cost, and yields 28‑45 % peak‑demand reduction while providing financial gains to the retailer, storage provider, and users.

Abstract

Here, a novel energy trading system is proposed for demand-side management of a neighborhood area network (NAN) consisting of a shared energy storage (SES) provider, users with non-dispatchable energy generation, and an electricity retailer. In a leader-follower Stackelberg game, the SES provider first maximizes their revenue by setting a price signal and trading energy with the grid. Then, by following the SES provider's actions, the retailer minimizes social cost for the users, i.e., the sum of the total users' cost when they interact with the SES and the total cost for supplying grid energy to the users. A pricing strategy, which incorporates mechanism design, is proposed to make the system incentive-compatible by rewarding users who disclose true energy usage information. A unique Stackelberg equilibrium is achieved where the SES provider's revenue is maximized and the user-level social cost is minimized, which also rewards the retailer. A case study with realistic energy demand and generation data demonstrates 28-45% peak demand reduction of the NAN, depending on the number of participating users, compared to a system without SES. Simulation results confirm that the retailer can also benefit financially, in addition to the SES provider and the users.