Micro-economy for microgrids

Saswati Sarkar

Generation of electricity from renewable sources promises to satisfy the ever-increasing consumer demand for electricity while reducing the fossil fuel consumption and the emission of environmentally detrimental green house gases. The emerging framework of microgrids may facilitate a gradual transition from the conventional sources used in the legacy power grid that can not be overhauled in a short time. Scientists envision that future electric networks will consist of a large ensemble of microgrids, potentially inter-connected through the macrogrid backbone, or even directly connected to each other. An important challenge deterring the proliferation of this promising technology is that electricity generation from renewable sources is stochastic and may not be controlled; the electricity demand is invariably stochastic. Thus, periodic electricity deficits and excesses are inevitable. Such deficits may be compensated and excesses utilized partly through limited storage, but more importantly through electricity trade among neighboring microgrids and the macrogrid, which may even constitute a major economic opportunity leading to private sector investments in this technology. But, although significant progress has been made in the microgrid generation and storage technology, electricity trades among microgrids have received limited attention. The existing schemes are primarily centralized and therefore not likely to scale as the technology proliferates. The penetration of this nascent technology is therefore contingent on the design of a distributed and scalable electricity trading framework equipped with dynamic pricing strategies that adapt to the load and price fluctuations of the macrogrid and all the microgrids. We present our first steps towards this end.