Distributed Bi-level Energy Allocation Mechanism with Grid Constraints and Hidden User Information

Abstract: A novel distributed energy allocation mechanism for Distribution System Operator (DSO) market through a bi-level iterative auction is proposed. With the locational marginal price at the substation node known, the DSO runs an upper level auction with aggregators as intermediate agents competing for energy. This DSO level auction takes into account physical grid constraints such as line flows, transformer capacities and node voltage limits. This auction mechanism is a straightforward implementation of projected gradient descent on the social welfare (SW) of all home level agents. Aggregators, which serve home level agents - both buyers and sellers, implement lower level auctions in parallel, through proportional allocation and without asking for utility functions and generation capacities that are considered private information. The overall bi-level auction is shown to be efficient and weakly budget balanced.