Development of A Leader–Follower Game Model for Competitive Electricity Pricing in Wind-Based Microgrids with Soft Imbalance Control

Abstract

This study develops a economic model for competitive electricity pricing in wind-based microgrids based on a leader–follower game framework. The decision-making structure consists of a wind energy producer, a microgrid, a Distribution Network Operator (DNO), and end consumers, which interact within a hierarchical framework. To preserve analytical tractability and avoid the complexity caused by difficult constraints, the imbalance between generation and demand is modeled through a soft penalty term in the microgrid’s profit function. In addition, the effect of a green incentive is incorporated as a supportive parameter in the microgrid’s profit structure. The demand function is defined by considering electricity price, network tariff, greenness level, and wind power generation, while the profit functions of the players are formulated in an integrated manner.The analytical results show that an increase in the imbalance penalty coefficient leads to more conservative pricing behavior, reduces demand, and limits the microgrid’s profit. In contrast, strengthening the green incentive reduces cost pressure, enables more competitive pricing, and improves both demand and profitability. The proposed framework can provide a basis for designing pricing mechanisms and economic policy-making in wind-based microgrids.