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Two-layer power trading mechanism to support distributed solar


 

Researchers from China have proposed a novel model for optimizing distributed power trading markets.

Their hybrid transaction model (HTM) operates as a two-tier market. The first tier involves trading between small prosumers and aggregation entities, while the second tier trades between aggregators and larger industrial and commercial parties. Blockchain technology secures and verifies the transactions.

“The development of the distributed power (DP) trading market in many emerging economies is still in its nascent stages, primarily attributed to the increasingly rational market mechanisms and the heightened regulatory demands that accompany the rising renewable energy penetration rate,” said the academics. “There is an urgent need to optimize the mechanisms underlying the DP trading market and to promote the development of DP resources.”

The HTM involves four participants: residential users, industrial and commercial users, power companies, and aggregators. Aggregators not only facilitate transactions but also pool resources. On the first tier, residential users trade excess energy with aggregators, who then use their stable supply and market power to engage with larger industrial and commercial buyers.

Residential users can buy electricity from aggregators or use stored power when their PV systems aren't producing. They can also sell surplus energy to aggregators or store it in their own storage systems.

Industrial and commercial users have three options: trade with aggregators in the DP market, buy power at varying prices based on demand, store surplus energy in aggregators' devices, or trade directly with other businesses in the market.

“The distributed power trading model between industrial and commercial users (Choice 3) works similarly to peer-to-peer (P2P) trading within a microgrid,” the scientists explained.

To ensure grid stability and meet real-time demand, researchers have based their trading mechanism for both layers on a continuous double auction (CDA). CDA, commonly used in securities trading, allows simultaneous bidding by both buyers and sellers. The system follows a “credit priority, price priority, time priority” rule, prioritizing the highest credit rating, then the best price, and finally the earliest bid.

“In this model, smart contracts automate transactions instantly, executing trades when predefined conditions are met, thereby reducing manual intervention and ensuring fairness. Blockchain technology further strengthens the trust of participants by ensuring the traceability and authenticity of each transaction,” the researchers said. “Additionally, it also streamlines the settlement process by recording transactions on a decentralized ledger, minimizing transaction costs and speeding up payments.”

The group has recommended several policy changes for China and similar markets to support the proposed model. These include promoting aggregator companies, integrating large-scale and decentralized storage into the market, and speeding up green certificate verification.

They introduced the proposed model in “Hybrid transaction model for optimizing the distributed power trading market,” which was recently published in Humanities and Social Sciences Communications. Researchers from Jiangnan University, Xiamen University, Southeast University, and China University of Petroleum (East China) conducted the study.

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