Effectiveness and Feasibility of Market Makers for P2P Electricity Trading

Shinji Kuno, Kenji Tanaka and Yuji Yamada
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Shinji Kuno: Commodity Business Department, Sumitomo Corporation, Tokyo 100-8601, Japan
Kenji Tanaka: Department of Technology Management for Innovation, The University of Tokyo, Tokyo 113-8656, Japan
Yuji Yamada: Faculty of Business Sciences, University of Tsukuba, Tokyo 112-0012, Japan

Energies, 2022, vol. 15, issue 12, 1-24

Abstract: Motivated by the growing demand for distributed energy resources (DERs), peer-to-peer (P2P) electricity markets have been explored worldwide. However, such P2P markets must be balanced in much smaller regions with a lot fewer participants than centralized wholesale electricity markets; hence, the market has inherent problems of low liquidity and price instability. In this study, we propose applying a market maker system to the P2P electricity market and developing an efficient market strategy to increase liquidity and mitigate extreme price fluctuations. To this end, we construct an artificial market simulator for P2P electricity trading and design a market agent and general agents (photovoltaic (PV) generators, consumers, and prosumers) to perform power bidding and contract processing. Moreover, we introduce market-maker agents in this study who follow the regulations set by a market administrator and simultaneously place both sell and buy orders in the same market. We implement two types of bidding strategies for market makers and examine their effects on liquidity improvement and price stabilization as well as profitability, using solar PV generation and consumption data observed in a past demonstration project. It is confirmed that liquidity and price stability may be improved by introducing a market maker although there is a trade-off relationship between these effects and the market maker’s profitability.

Keywords: P2P electricity market; market maker; liquidity; price fluctuation; bidding strategy; artificial market simulation (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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