Stackelberg-Auction Demand Response Design to Enhance Prosumers Participation in Local Electricity Markets

Local Electricity Markets (LEMs) enable decentralized energy trading, reducing carbon emissions and grid costs while integrating renewable energy sources. However, barriers such as intermittent generation, fluctuating demand, and consumer uncertainty prevent effective management. This research presents an auction-based demand response mechanism that uses a Stackelberg game to increase the engagement of prosumers in LEMs. The model analyzes consumer participation, demand flexibility, and decision-making, taking into account the uncertainty surrounding willingness to participate. The grid operator serves as the leader, sending price signals to encourage flexibility, while aggregators and distributed energy resource owners participate in a uniform-price auction. The operator selects the lowest-cost proposals to ensure grid stability and reliability. The Stackelberg game model used in our research enables precise forecasting of demand response (DR) behavior and improves decision-making in a dynamic energy landscape from the operator's perspective. The outcome is a decision-making tool that enables operators to predict consumer behavior more efficiently and increase demand-side participation in LEMs. This study provides policymakers with significant information, including data-driven recommendations to enhance the adoption of renewable energy sources, improve regulatory frameworks, and promote sustainable growth in the energy market. Additionally, this study facilitates the design of efficient, flexible, and resilient energy systems.