A Novel Pricing Mechanism for Grid-friendly Sustainable Neighbourhood Energy Trading

The PV penetration level is increasing significantly in distribution network. More customers may tend to install batteries with PV, so they can have more control over their bills. In this context, customers may be tempted to go off-grid at a substantial up-front cost, leading electricity companies into a death spiral thus raising electricity price further on those remaining on grid. Neighbourhood energy markets can promote the sharing of locally generated renewable energy and encourage prosumers to stay on grid with financial incentives. Although neighbourhood energy markets are clearly becoming important, existing studies often focus on the development of pricing mechanisms for the centralized or pairwise energy trading with no mechanism for managing network constraints or losses. For a centralized market design, its communication may be not scalable because of the sheer volume of customers’ in distribution networks. A novel neighbourhood energy trading (NET) mechanism is developed using existing distribution network asset to encourage sustainable energy sharing in neighbourhood and encourage prosumers to stay on grid. With an economic demand and supply approach, this mechanism continuously updates price and flow information until a convergence is reached. This mechanism considers loss, congestion and voltage constraints, and it is scalable with low computation and communication overhead. An IEEE 13-bus test system is used to validate the new mechanism. Simulation shows price and flow results are obtained with fast computation (within 10 iterations) and with loss reflected, congestion reinforced, and voltage regulated. This study is the first time to prove the concept that the economic demand-supply-based pricing mechanism can be applied effectively in neighbourhood energy trading to help encourage more renewable energy sharing in sustainable neighbourhood and avoid energy network death spiral