IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v377y2025ipcs0306261924019263.html
   My bibliography  Save this article

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

Author

Listed:
  • Sim, Jisu
  • Lee, Deok-Joo
  • Yoon, Kiho

Abstract

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.

Suggested Citation

  • Sim, Jisu & Lee, Deok-Joo & Yoon, Kiho, 2025. "Incentive-compatible double auction for Peer-to-Peer energy trading considering heterogeneous power losses and transaction costs," Applied Energy, Elsevier, vol. 377(PC).
  • Handle: RePEc:eee:appene:v:377:y:2025:i:pc:s0306261924019263
    DOI: 10.1016/j.apenergy.2024.124543
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261924019263
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.apenergy.2024.124543?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Khorasany, Mohsen & Razzaghi, Reza & Shokri Gazafroudi, Amin, 2021. "Two-stage mechanism design for energy trading of strategic agents in energy communities," Applied Energy, Elsevier, vol. 295(C).
    2. Dudjak, Viktorija & Neves, Diana & Alskaif, Tarek & Khadem, Shafi & Pena-Bello, Alejandro & Saggese, Pietro & Bowler, Benjamin & Andoni, Merlinda & Bertolini, Marina & Zhou, Yue & Lormeteau, Blanche &, 2021. "Impact of local energy markets integration in power systems layer: A comprehensive review," Applied Energy, Elsevier, vol. 301(C).
    3. Xu, Shuang & Zhao, Yong & Li, Yuanzheng & Zhou, Yue, 2021. "An iterative uniform-price auction mechanism for peer-to-peer energy trading in a community microgrid," Applied Energy, Elsevier, vol. 298(C).
    4. Guerrero, Jaysson & Sok, Bunyim & Chapman, Archie C. & Verbič, Gregor, 2021. "Electrical-distance driven peer-to-peer energy trading in a low-voltage network," Applied Energy, Elsevier, vol. 287(C).
    5. Tushar, Wayes & Yuen, Chau & Saha, Tapan K. & Morstyn, Thomas & Chapman, Archie C. & Alam, M. Jan E. & Hanif, Sarmad & Poor, H. Vincent, 2021. "Peer-to-peer energy systems for connected communities: A review of recent advances and emerging challenges," Applied Energy, Elsevier, vol. 282(PA).
    6. Guo, Jiantao & Zhang, Juliang & Cheng, T.C.E. & Zhao, Shouting, 2022. "Truthful double auction mechanisms for online freight platforms with transaction costs," Transportation Research Part B: Methodological, Elsevier, vol. 158(C), pages 164-186.
    7. Wang, Juan & Zheng, Junjun & Yu, Liukai & Goh, Mark & Tang, Yunying & Huang, Yongchao, 2023. "Distributed Reputation-Distance iterative auction system for Peer-To-Peer power trading," Applied Energy, Elsevier, vol. 345(C).
    8. Zheng, Boshen & Wei, Wei & Chen, Yue & Wu, Qiuwei & Mei, Shengwei, 2022. "A peer-to-peer energy trading market embedded with residential shared energy storage units," Applied Energy, Elsevier, vol. 308(C).
    9. Leon Yang Chu & Zuo-Jun Max Shen, 2008. "Truthful Double Auction Mechanisms," Operations Research, INFORMS, vol. 56(1), pages 102-120, February.
    10. Leon Yang Chu & Zuo-Jun Max Shen, 2006. "Agent Competition Double-Auction Mechanism," Management Science, INFORMS, vol. 52(8), pages 1215-1222, August.
    11. Huang, George Q. & Xu, Su Xiu, 2013. "Truthful multi-unit transportation procurement auctions for logistics e-marketplaces," Transportation Research Part B: Methodological, Elsevier, vol. 47(C), pages 127-148.
    12. Zhang, Chenghua & Wu, Jianzhong & Zhou, Yue & Cheng, Meng & Long, Chao, 2018. "Peer-to-Peer energy trading in a Microgrid," Applied Energy, Elsevier, vol. 220(C), pages 1-12.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guo, Jiantao & Zhang, Juliang & Cheng, T.C.E., 2024. "Truthful multi-unit double auction with transaction costs and sellers’ changing marginal costs," International Journal of Production Economics, Elsevier, vol. 278(C).
    2. Azim, M. Imran & Tushar, Wayes & Saha, Tapan K. & Yuen, Chau & Smith, David, 2022. "Peer-to-peer kilowatt and negawatt trading: A review of challenges and recent advances in distribution networks," Renewable and Sustainable Energy Reviews, Elsevier, vol. 169(C).
    3. Arnob Das & Susmita Datta Peu & Md. Abdul Mannan Akanda & Abu Reza Md. Towfiqul Islam, 2023. "Peer-to-Peer Energy Trading Pricing Mechanisms: Towards a Comprehensive Analysis of Energy and Network Service Pricing (NSP) Mechanisms to Get Sustainable Enviro-Economical Energy Sector," Energies, MDPI, vol. 16(5), pages 1-27, February.
    4. Yu, Hao & Huang, Min & Chao, Xiuli & Yue, Xiaohang, 2022. "Truthful multi-attribute multi-unit double auctions for B2B e-commerce logistics service transactions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 164(C).
    5. Botelho, D.F. & de Oliveira, L.W. & Dias, B.H. & Soares, T.A. & Moraes, C.A., 2022. "Integrated prosumers–DSO approach applied in peer-to-peer energy and reserve tradings considering network constraints," Applied Energy, Elsevier, vol. 317(C).
    6. Cheng, Meng & Xu, Su Xiu & Huang, George Q., 2016. "Truthful multi-unit multi-attribute double auctions for perishable supply chain trading," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 93(C), pages 21-37.
    7. Herenčić, Lin & Kirac, Mislav & Keko, Hrvoje & Kuzle, Igor & Rajšl, Ivan, 2022. "Automated energy sharing in MV and LV distribution grids within an energy community: A case for Croatian city of Križevci with a hybrid renewable system," Renewable Energy, Elsevier, vol. 191(C), pages 176-194.
    8. Ding, Xiaoshu & Qi, Qi & Jian, Sisi, 2024. "Truthful online double auctions for on-demand integrated ride-sourcing platforms," European Journal of Operational Research, Elsevier, vol. 317(3), pages 737-747.
    9. Guo, Jiantao & Zhang, Juliang & Cheng, T.C.E. & Zhao, Shouting, 2022. "Truthful double auction mechanisms for online freight platforms with transaction costs," Transportation Research Part B: Methodological, Elsevier, vol. 158(C), pages 164-186.
    10. Younes Zahraoui & Tarmo Korõtko & Argo Rosin & Hannes Agabus, 2023. "Market Mechanisms and Trading in Microgrid Local Electricity Markets: A Comprehensive Review," Energies, MDPI, vol. 16(5), pages 1-52, February.
    11. Sun, Jiasen & Li, Guo & Xu, Su Xiu & Dai, Wei, 2019. "Intermodal transportation service procurement with transaction costs under belt and road initiative," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 127(C), pages 31-48.
    12. Zheng, Boshen & Wei, Wei & Chen, Yue & Wu, Qiuwei & Mei, Shengwei, 2022. "A peer-to-peer energy trading market embedded with residential shared energy storage units," Applied Energy, Elsevier, vol. 308(C).
    13. Kisal Kawshika Gunawardana Hathamune Liyanage & Shama Naz Islam, 2024. "Comparative Analysis of Market Clearing Mechanisms for Peer-to-Peer Energy Market Based on Double Auction," Energies, MDPI, vol. 17(22), pages 1-17, November.
    14. Zade, Michel & Lumpp, Sebastian Dirk & Tzscheutschler, Peter & Wagner, Ulrich, 2022. "Satisfying user preferences in community-based local energy markets — Auction-based clearing approaches," Applied Energy, Elsevier, vol. 306(PA).
    15. Gorbatcheva, Anna & Watson, Nicole & Schneiders, Alexandra & Shipworth, David & Fell, Michael J., 2024. "Defining characteristics of peer-to-peer energy trading, transactive energy, and community self-consumption: A review of literature and expert perspectives," Renewable and Sustainable Energy Reviews, Elsevier, vol. 202(C).
    16. Xiao, Haohan & Xu, Meng & Gao, Ziyou, 2018. "Shared parking problem: A novel truthful double auction mechanism approach," Transportation Research Part B: Methodological, Elsevier, vol. 109(C), pages 40-69.
    17. Xu, Su Xiu & Cheng, Meng & Huang, George Q., 2015. "Efficient intermodal transportation auctions for B2B e-commerce logistics with transaction costs," Transportation Research Part B: Methodological, Elsevier, vol. 80(C), pages 322-337.
    18. Matija Kostelac & Lin Herenčić & Tomislav Capuder, 2022. "Planning and Operational Aspects of Individual and Clustered Multi-Energy Microgrid Options," Energies, MDPI, vol. 15(4), pages 1-17, February.
    19. Félix González & Paul Arévalo & Luis Ramirez, 2025. "Game Theory and Robust Predictive Control for Peer-to-Peer Energy Management: A Pathway to a Low-Carbon Economy," Sustainability, MDPI, vol. 17(5), pages 1-23, February.
    20. Wang, Juan & Zheng, Junjun & Yu, Liukai & Goh, Mark & Tang, Yunying & Huang, Yongchao, 2023. "Distributed Reputation-Distance iterative auction system for Peer-To-Peer power trading," Applied Energy, Elsevier, vol. 345(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:377:y:2025:i:pc:s0306261924019263. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.