A Game-theoretic Framework to Investigate Conditions for Cooperation between Wind Power Producers and Energy Storage Operators

Game theory has its applications in various domains, but has only recently been applied to study open problems in smart microgrids. A simple microgrid system with a small wind farm, a storage facility and an aggregate load entity is studied here using a non-cooperative game-theoretic framework.

The framework developed is used to study the behavior of rational market participants (players), namely wind power producer and energy storage. The framework is implemented to find the existence of any Nash equilibria and see if cooperation is a natural outcome of the game. If cooperation is not self-enforcing then usefulness of the framework to find the conditions for cooperation is presented. It must be noted that cooperation is not automatically guaranteed as the payoff of the energy storage operator is dependent on the strategy employed by the wind power producer. Similarly, the payoff for the wind power producer is highly intertwined with the strategy employed by the energy storage operator. Historical weather and market data is used to calculate expected payoffs for each possible combination of strategies. The results are presented in the form of payoff matrices and the best response algorithm and/or elimination of dominated strategies is used to find the Nash equilibrium.

Sensitivity of the Nash equilibrium to various storage parameters like storage size, charging/discharging limits, charging/discharging efficiency, and other market parameters like energy imbalance penalties, efficiency of up/down regulation, and electricity market prices is studied and necessary conditions for cooperation are presented.