Optimal Subsidy Policy for Green Energy Trading among Three Parties: A Game Theoretical Approach

Abstract

In this paper, we present the optimal strategy for green energy trading among three parties: user residents (URs), service provider (SP), and the grid. The URs make decisions about the amount of generated green energy for self-usage and trading. The SP collects green energy from URs and trade in the market and receives subsidy from the grid. The grid which is government owned subsidizes the SP to promote the adoption of green energy, so that the environment can be improved and social surplus benefits. To obtain insights of such a highly coupled system, we consider a monopoly market, where there are a group of URs trading with a single service provider. To find the optimal strategy of the three parties, we propose a three-stage Stackelberg game model. Besides, the grid's optimal subsidy policy, the SP's optimal pricing strategies, and URs' optimal usage strategy are also provided in each stage. Both the analytical and simulation results show that, the optimal decisions such as the amount of green energy generated by UR and the subsidy given by the grid are all decreasing functions of URs' average cost. High infrastructure and operation costs to obtain green energy deteriorate each party's payoff and the whole system's performance.