Distributed Bi-level Energy Allocation Mechanism with Grid Constraints and Hidden User Information

A novel distributed energy allocation mechanism for distribution system operator (DSO) market through a bilevel iterative auction is proposed. With the locational marginal price known at the substation node, the DSO runs an upper level auction with aggregators as intermediate agents competing for energy. This DSO level auction takes into account physical grid constraints such as line flows, transformer capacities and node voltage limits. This auction mechanism is a straightforward implementation of projected gradient descent on the social welfare (SW) of all home level agents. Aggregators, which serve home level agents both buyers and sellers, implement lower level auctions in parallel, through proportional allocation of power, until market equilibrium is established. This is accomplished without asking for the agents’ utility functions and generation capacities that are considered private information. The overall bilevel auction is shown to be globally efficient and weakly budget balanced.