Auction Based Distributed and Optimal Trading Mechanism in Electricity Markets under Blockchains

Abstract

Auction mechanisms have been widely applied in the electricity market for determining the market price and energy trading. Those who take demand response into consideration are promising to enable interaction of end-users with the grid. In addition, blockchain is an effective way to secure the energy trading in the electricity market. In this paper, a new pricing mechanism based on auction is proposed to induce users to participate actively with the goal of social welfare maximization and to reduce the storage burden of blockchains. In this mechanism, each user submits individual bids to the system/auctioneer. The auctioneer makes optimal allocation with respect to the submitted bidding profile and broadcasts the market price to all the participants. To obtain the optimal trading strategy, an energy distribution algorithm is proposed. In this algorithm, each individual user updates its best response with respect to the market price, which is determined by the set of previous bidding curves. The expected system price determines the user’s best response while the resulting load pattern will change this price reversely.