A Bi-Level Nash Bargaining Model for Electricity Trading Among Microgrids With Endogenous Nodal Prices

Determining a fair trading price is challenging, and this complexity is further heightened in power systems as the price must consider network constraints, fluctuating and endogenous electricity prices, and generation cost. This paper proposes a novel Nash-in-Stackelberg model designed to coordinate a collection of independently operated microgrids. Within this framework, the microgrids engage in a bargaining game to collectively decide a fair trading price as well as other operational decisions. We use the Nash bargaining solution (NBS) to model this interaction. Microgrids’ trading decisions impact the locational marginal prices of the main power grid. Hence, a Stackelberg game is used to determine these prices. The Stackelberg model considers microgrids as leaders (upper-level problem) and the independent system operator as follower (lower-level problem). The NBS guarantees a fair allocation of the generated profit based on individual characteristics of the microgrids. In specific, in scenarios of higher generation, we achieve a cost reduction of $884 and $904 per microgrid compared with a grand coalition where only one microgrid receives the total cost reduction ($1788). Also we noticed that increasing the amount of solar-generated electricity reduces the nodal price in 1.53% and consequently the trading price in 1.27%.