Consensus-based Approach to Peer-to-Peer Electricity Markets with Product Differentiation

With the sustained deployment of distributed generation capacities and the more proactive role of consumers, power systems and their operation are drifting away from a conventional top-down hierarchical structure. Electricity market structures, however, have not yet embraced that evolution. Respecting the high-dimensional, distributed and dynamic nature of modern power systems would translate to designing peer-to-peer markets, or at least to using such a structure in the background for a bottom-up approach to future electricity markets. A peer-to-peer market structure based on a Multi-Bilateral Economic Dispatch (MBED) formulation is introduced, allowing for multi-bilateral trading with product differentiation, for instance based on consumer preferences. Consequently a Relaxed Consensus+Innovation (RCI) approach is proposed to solve the MBED in fully decentralized manner. A set of realistic case study analyses shows that such peer-to-peer market structures can effectively reduce externalities on power systems with a limited cost increase compared to centralized market approaches. Additionally, the RCI solving approach allows for a fully decentralized market clearing which converges with a negligible optimality gap, with a limited amount of information being shared.