Incentive-compatible double auction for Peer-to-Peer energy trading considering heterogeneous power losses and transaction costs

Peer-to-Peer (P2P) energy trading has garnered significant attention due to its potential to enhance energy efficiency and promote decentralized energy systems. Designing an effective P2P energy trading market hinges on making efficient P2P transactions and incentivizing truthful information disclosure among participants. Addressing this challenge, our study introduces a trustful double auction mechanism for P2P energy trading incorporating heterogeneous power losses and transaction costs into its framework. Our mechanism includes efficient matching and allocation rules that deal with the environment in which the amount of power losses and transaction costs vary depending on whom the prosumers trade with by integrating Multi-unit Trade Reduction (MTR) and Vickrey–Clarke–Groves (VCG) mechanisms. Moreover, we present a modified VCG transfer rule that prevents budget deficits in bilateral trading contexts while effectively reducing efficiency loss. It is shown that our mechanism satisfies dominant strategy incentive compatibility, individual rationality, budget balance, and asymptotic efficiency. Numerical analysis validates its performance, highlighting the impacts of power losses and transaction costs on the overall performance of our auction mechanism.