Is it worthwhile to participate in transactive energy? A decision-making model for empowering residential customers

Abstract

The deployment of transactive energy systems hinges on well-defined policies that govern the decisions of transactive agents. Traditionally, upper-level agents, such as distribution system operators, aggregators, or coordinators, assume perpetual acceptance and participation by lower-level agents, like residential customers, in new demand-side programs. This assumption, alongside the presumption of agents’ benevolent behavior in a transactional environment, often overlooks the potential for false information in electricity markets, leading to significant economic losses and program failures. To address these challenges, we develop a transactive energy system based on mechanism design, structured around four comprehensive phases: Enrollment, Coordination, Execution, and Settlement. Customers adopt a decision-making model grounded in convex stochastic programming, enabling them to freely choose their daily enrollment in a demand response program and define their willingness to coordinate day-ahead electricity consumption once the Enrollment phase is cleared. The payment rule proposed in this work, which includes a penalty policy for energy deviations, ensures truthful information reporting from residential agents to the coordinator within a negotiation environment. Our results demonstrate that residential agents’ enrollment decisions vary according to the penalty values defined by the coordinator. Additionally, the number of customers enrolled in the Coordination phase significantly influences the coordinator’s daily profits. The study also highlights how electricity deviations during the Execution phase can increase customers’ costs beyond initial expectations, emphasizing the importance of adherence to planned consumption for optimal economic outcomes. This research offers a comprehensive transactive energy system that enhances customer participation through the principle of individual rationality and ensures truthful information reporting among agents based on the incentive compatibility concept in a day-ahead electricity market. Then, is it worthwhile to participate in transactive energy? The short answer is yes, and the reasons are unveiled throughout this paper.