A game-theoretic, market-based approach to extract flexibility from distributed energy resources

Abstract: We propose a market designed using game theory to optimally utilize the flexibility of distributed energy resources (DERs) like solar, batteries, electric vehicles, and flexible loads. Market agents perform multiperiod optimization to determine their feasible flexibility limits for power injections while satisfying all constraints of their DERs. This is followed by a Stackelberg game between the market operator and agents. The market operator as the leader aims to regulate the aggregate power injection around a desired value by leveraging the flexibility of their agents, and computes optimal prices for both electricity and flexibility services. The agents follow by optimally bidding their desired flexible power injections in response to these prices. We show the existence and uniqueness of a Nash equilibrium among all the agents and a Stackelberg equilibrium between all agents and the operator. In addition to deriving analytical closed-form solutions, we provide simulation results for a small example system to illustrate our approach.