Strategic equilibrium of economic dispatch in smart grid with a bi‐level game approach

It is necessary to design an economic dispatch mechanism to ensure the stability of the electricity market and the equilibrium of pricing strategy in a smart grid with real‐time pricing. In this study, the pricing strategy in the smart grid is analysed by modelling the economic dispatch problem as a bi‐level game in the electricity market, including the wholesale market and the retail market. In the wholesale market, the negotiation of the wholesale price between the generation company and multiple utility companies is formulated as a Nash bargaining problem. In order to guarantee the profit of the generation company and the social welfare of the utility companies simultaneously, the Nash bargaining solution is adopted to find an optimal wholesale price. In the retail market, the Shapley value is utilised to achieve profit distribution among the utility companies, and then a distributed gradient algorithm is proposed to search for the optimal retail price. Numerical results demonstrate the effectiveness of the proposed algorithm and the superiority of the economic dispatch strategy.