Prospect theoretic analysis of energy exchange among microgrids

Liang Xiao, Narayan B. Mandayam, H. Vincent Poor

Research output: Contribution to journalArticlepeer-review

102 Scopus citations


The energy exchange between microgrids (MGs) that are capable of generating power from renewable energy sources in smart grids is investigated. As MGs are autonomous and have control over their energy exchange, prospect theory is a useful tool to provide a user-centric view on MG power trading. More specifically, in this paper, the energy exchange among MGs that are also connected to a power plant as a backup energy supply is formulated as a prospect theory-based static game and Nash equilibria are provided under various scenarios. The impact of user objective weight is evaluated during the outcome evaluation on the performance of the game. Simulation results show that user subjectivity tends to exaggerate selling and buying probabilities when battery levels are high (and low), and thus decreases the overall utility and increases the amount of the energy bought at either low battery levels or low MG selling prices. Conditions on the pricing system to ensure that the energy exchange system is not impacted by the subjective view of MGs are also provided.

Original languageEnglish (US)
Article numberA28
Pages (from-to)63-72
Number of pages10
JournalIEEE Transactions on Smart Grid
Issue number1
StatePublished - Jan 1 2015
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • General Computer Science


  • Energy exchange
  • game theory
  • microgrids (MGs)
  • prospect theory (PT)


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