Real-time pricing via distributed negotiations between prosumers in smart grids

In smart grids, Real-Time Pricing (RTP) is one of the most promising solutions for stabilizing power systems suffering from electricity shortage. RTP controls and time-shifts customer demand by adjusting electricity prices every moment. Normally, we assume the existence of Independent System Operators (ISOs) which determine the prices. Some countries have established ISOs to control their power systems. However, still many countries do not adopt ISOs, but they are discussing the necessity of ISOs. The main objective of this paper is to show that ISOs are not necessarily required to implement RTP programs. Actually, a new pricing algorithm is proposed which determines appropriate prices through negotiations between players (consumers, suppliers and distributors) through computer networks. This algorithm is mathematically rigid because it is based on an optimization method. We show that players can obtain appropriate prices without ISOs via distributed negotiations which stabilize the power systems.