Dynamic Pricing for Distributed Generation in Smart Grid

The smart grid introduces significant challenges for the reliability and economics of traditional power grids. Dynamic pricing is an important mechanism for improving effectiveness of the smart grid. Presently, the smart grid pricing research mainly focuses on the interactions between a single energy provider and multiple energy consumers. However, in a deregulated energy market, it is possible that there exist multiple energy suppliers who compete with each other. In this paper, we examine a microgrid consisting of multiple generators. We propose a generic pricing mechanism based on the QoS of the power supply inside the microgrid. In particular, a noncooperative game is formulated to capture the competitive market and to study the energy supply strategies of multiple energy suppliers. For solving the game, a distributed algorithm is proposed using which the energy suppliers can reach a Nash equilibrium point. Furthermore, we show that due to the inefficiency of distributed decisions, microgrids may cooperate and form a coalition. In this case, microgrids cooperate by jointly coordinating their energy supply in order to increase their aggregated utilities. As a result, their individual payoffs may increase substantially. Cooperative game theory is used to study the coalition formation process and the profit allocation inside the coalition. Numerical examples are presented to show the performance of the proposed pricing scheme.