A bi-level framework for interactive competition and CPPs-based demand response

Abstract

This paper proposes a multi-leader–follower framework for interactive competition among participants. To do so, a Stackelberg game model is formulated to take into account the price competition between leaders and captive power plants (CPPs). The retailer and the distribution company (DISCO) adopt a rival strategy to determine sale prices, aiming to maximize respective profit in a competitive market. DISCO pricing bound is set during the interaction process. The response at the lower level also affects hierarchical prices and CPP revenue. CPPs enact demand response viable through load shifting and peer-to-peer (P2P) energy trading. A quadratic penalty function is employed in the model to reduce the peak load demand and reshape the load profile, which brings the load consumption curve close to the forecast value. A general Nash bargaining game is utilized to incentivize P2P energy sharing with neighbors. To solve the multi-leader–follower model, a fixed-point iteration algorithm is proposed, which enables the model to reach convergence. Simulations are conducted to demonstrate the price–demand relationship and hierarchical interaction.