A game theory-based pricing model for ancillary services in electricity markets

Abstract

Abstract Amidst the ongoing evolution and substantial reforms within the electric power market, the development of an auxiliary service pricing model grounded in game theory emerges as crucial. This study delineates the construction of an electricity auxiliary service pricing model, utilizing a dual mechanism approach: a cooperative game-based electricity price formation mechanism and a Stackelberg game-based time-sharing pricing mechanism. Furthermore, it incorporates demand response technology to conduct a detailed analysis of optimization results and the applicability of the proposed electricity service pricing model. The pricing scheme designated as Scheme 4, derived from the proposed model, demonstrates notable superiority in terms of economic efficiency and environmental sustainability when juxtaposed with three alternative schemes. Specifically, Scheme 4 yields a net profit of $13,267.6, achieves clean energy utilization amounting to 89.67 MWh, and minimizes wind abandonment to 17.35 MWh, outperforming all other considered scenarios in these metrics. Operational analysis reveals that the model's execution time varies between 15 and 50 seconds across different sample sizes, exhibiting minimal fluctuations. Additionally, the Monte Carlo simulations consistently produce values inferior to the objective function value of the developed model, with the discrepancy narrowing from 38 to 20, indicating the model's robust adaptability.