Optimizing Peer-to-Peer Electricity Markets by Integrating Pricing Mechanisms and Grid Constraints for Enhanced Efficiency and Equity

The integration of renewable energy sources has activated the development of peer-to-peer (P2P) electricity markets, enabling decentralized energy trading between consumers and prosumers. These markets promise enhanced system flexibility, efficiency, and sustainability but encounter challenges in grid stability, equitable benefit distribution, and pricing mechanisms, particularly in low-voltage distribution systems. This paper addresses these challenges by proposing an optimization framework that integrates pricing mechanisms with operational constraints to improve both efficiency and equity in P2P electricity markets. This paper evaluates three pricing mechanisms—uniform, midpoint, and weighted pricing—under two scenarios: with and without power export curtailment. Using a simulation of energy transactions, the results highlight the strengths and limitations of each pricing mechanism in terms of market efficiency, benefit distribution, and grid stability. Weighted pricing demonstrates adaptability to constrained conditions, ensuring equitable benefit distribution and promoting social welfare, albeit with challenges in balancing benefits between buyers and sellers. The results provide critical insights into the design and implementation of equitable and efficient P2P electricity markets, emphasizing the importance of designed pricing mechanisms. This paper contributes to the advancement of decentralized energy systems, paving the way for broader adoption of sustainable and resilient energy solutions in low-voltage distribution networks.