Fair Electricity Transfer Pricing and Capacity Planning in a Microgrid

Microgrids are considered as a promising alternative to current centralized power generation systems. They have benefits in terms of economics, environment and security. As a local power network, the participants in a microgrid cooperate and can achieve better economic benefits. There is a desire to design and operate a microgrid with a fair settlement which can minimize the equivalent annual cost for the whole microgrid while ensuring adequate rewards for each participant. In this paper, a mathematical programming formulation is presented for fair, optimised profit distribution among participants in a general microgrid. The proposed formulation is based on an approach applying the Nash bargaining solution for finding optimal multi-partner profit levels subject to given upper bounds on the equivalent annual cost. The model is applied to a microgrid case study involving five local participants.