Mechanism design for decentralized peer-to-peer energy trading considering heterogeneous preferences

The bottom-up evolution of power systems demonstrates that the integrated decentralized grid is a compelling vision of the future distribution grid. Hence, the concept of fully decentralized peer-to-peer (P2P) energy markets allows the prosumers to directly trade electricity among each other and makes them one step closer to be independent from upstream generation. To this end, an appropriate market mechanism should be designed to not only the prosumers get encouraged to participate in the market but prosumers’ preferences get taken into consideration. In this paper, a fully decentralized market mechanism is designed in which the preferences of prosumers including willingness to trade green energy, trading partner's reputation and location in the network are taken into account. Prosumers check other peers’ attributes and select the one who satisfies their preferences the most. The designed market mechanism satisfies market properties involving balanced budget, individual rationality, and Bayesian-Nash incentive compatibility. Prosumers with excess/shortage of power are motivated to individually participate in the market while preserving their privacy. Simulation results verify the effectiveness of the proposed mechanism and premiums in the matching pattern and achieving the desired outcome for prosumers over the course of a day.