Designing a Marketplace for the Trading and Distribution of Energy in the Smart Grid

Decentralized energy production is meant to reduce generation and distribution inefficiencies, leading to major economic and environmental benefits. This new model is meant to be supported by smart grids, electricity networks that can intelligently integrate the actions of all users connected to them - generators, consumers, and prosumers (those that do both) - to efficiently deliver sustainable, economic and secure electricity supplies. A major research challenge is the design of markets for prosumers in smart grids that consider distribution grid constraints. This paper introduces a novel market that allows prosumers to trade electricity while satisfying the constraints of the grid. Our market's allocation rule is implemented by means of the so-called RADPRO, an efficient dynamic programming algorithm that assesses in polynomial time how much energy each prosumer trades as well as how energy must be distributed throughout the grid. Our empirical results show that RADPRO significantly outperforms both CPLEX and Gurobi in solving time when computing the optimal allocation over acyclic networks. Furthermore, the message-passing nature of RADPRO offers the possibility of running our market in a decentralized (peer-to-peer) manner.