Dynamic incentive mechanism for direct energy trading

Abstract

Direct Energy trading is a promising approach to simultaneously achieve trading benefits and reduce transmission line losses. Due to the characteristics of selfish requirement and asymmetric information, how to provide proper incentives for the electricity consumer (EC) and small-scale electricity supplier (SES) to take part in direct energy trading is an essential issue. Considering the variable characteristic of requirements and environment in direct energy trading, a two-period dynamic contract incentive mechanism is introduced into the long-term direct energy trading. The optimal contract is designed to obtain the maximum expected utility of the EC based on the individually rational and incentive compatible conditions. Simulation result shows that the optimal dynamic contract is efficient to improve the performance of direct energy trading.