Towards Decentralized Grids

Abstract

We witness the rise of prosumers: consumers that produce a surplus of energy that can be sup- plied back into the grid. However, for energy-trade between prosumers and consumers, a cen- tralized and undesirable middle-man is still necessary. We developed a method to decentralize essential aspects of energy distribution between households. Macro-grids are divided into vari- ous neighborhood sized community-grids; a micro-grid. A micro-grid as a community yields a degree of self-sustainability. Nevertheless, micro-grids currently still possess centralized elements. The presence of central controllers, trading-agents or banks, maintains this undesirable situation. Decentralization of a power-grid increases end-user autonomy, independency and fairness in the system.
We propose to establish a truly transactive micro-grid: decentralized in its energy distribution, control and money-flow by deploying EnergyBazaar, a distributed trading algorithm. Concepts of game theory are used in the design to enable EnergyBazaar to solve the economic dispatch problem: agents want to individually optimize their social welfare, while the collective task is to stabilize the grid. Micro-grids make use of a decoupled hierarchical structure: primary control is responsible for fast dynamics of voltage and frequency, secondary control coordinates the economics within the micro-grid. In its core, EnergyBazaar coordinates inverter-based droop parameters within the Energy Storage System (ESS) of each agent, managing their charging/discharging behaviour. A trade-off is identified between economical gain and the necessity of surviving energy scarcity. For this, energy patterns are predicted and acted upon. In contrast to a coordinator dictating a centralized solution, EnergyBazaar creates a free market, where agents individually converge to a global Nash equilibrium. A comparison is made to show performance of both.
By rejecting centralized institutions in the micro-grid, trust challenges are introduced: achieving decentralized money-flows, the necessity of shared information during distributed optimization and the manipulation of the free-market by malicious agents. We introduce an approach of mitigating these issues in a decentralized paradigm by embedding EnergyBazaar in a smart-contract deployed on a blockchain platform.