A Game Theoretic Model of Demand Response Aggregator Competition for Selling Stored Energy in Regulated and Unregulated Power Markets

This work is concerned with the application of game-theoretic principles to model competition between demand response aggregators for selling excess energy stored in electrochemical storage devices directly to other aggregators in a power market. This market framework is presented as an alternative to the traditional vertically-integrated market structure, which may be better suited for developing demand response and smart-grid technologies, in addition to increasing penetration of independent renewable energy generation devices. Demand for power generated by the utility through combustion of fuel could be replaced, lowering emission of pollutants, when the energy used to charge the batteries is produced sustainably and traded on smaller scales. The four variants of game are considered: both non-cooperative (unregulated competition) and Stackelberg (regulations on transaction price and size), each with and without DR scheduling. The Nash equilibrium is derived for each game variant in order to serve as a bid-price decision making criteria which determines the optimal bidding strategy for an aggregator to sell in the market. The model is applied to a case study involving completion for selling between two aggregators. Bidding strategy is dependent on parameters inherent to an aggregator’s energy storage hardware, and the strategy selected by each aggregator does not vary with the variations in the game conditions considered. Demand response scheduling offers greater payoff for aggregators who implement it, compared with those who do not. Addition of transaction price and volume regulations to the market do not affect the participants optimal bidding strategies (the Nash equilibrium), but lowers payoffs for all aggregators participating in the market relative to unregulated competition.