Title: A Novel Algorithm for Optimal Electricity Pricing in a Smart Microgrid Network,
Abstract: The evolution of smart microgrid and its demand-response characteristics not
only will change the paradigms of the century-old electric grid but also will
shape the electricity market. In this new market scenario, once always energy
consumers, now may act as sellers due to the excess of energy generated from
newly deployed distributed generators (DG). The smart microgrid will use the
existing electrical transmission network and a pay per use transportation cost
without implementing new transmission lines which involve a massive capital
investment. In this paper, we propose a novel algorithm to minimize the
electricity price with the optimal trading of energy between sellers and buyers
of the smart microgrid network. The algorithm is capable of solving the optimal
power allocation problem (with optimal transmission cost) for a microgrid
network in a polynomial time without modifying the actual marginal costs of
power generation. We mathematically formulate the problem as a nonlinear
non-convex and decompose the problem to separate the optimal marginal cost
model from the electricity allocation model. Then, we develop a
divide-and-conquer method to minimize the electricity price by jointly solving
the optimal marginal cost model and electricity allocation problems. To
evaluate the performance of the solution method, we develop and simulate the
model with different marginal cost functions and compare it with a first come
first serve electricity allocation method.