Applications of game theory to design and operation of modern power systems: A comprehensive review

In this work, we review papers that employ game theoretic tools to study the operation and design of modern electric grids. We consider four topics in this context: energy trading, energy balancing, grid planning, and system reliability, and we demonstrate the advantages of using game-theoretic approaches for analyzing complex interactions among independent players. The results and conclusions provide insights regarding many aspects of design and operation, such as efficient methodologies for expansion planning, cyber-security, and frequency stability, or fair-benefit allocation among players. A central conclusion is that modeling the system from the perspective of one entity with unlimited information and control span is often impractical, so correct modeling of the selfish behavior of independent players may be critical for the development of future power systems. Another conclusion is that correct usage of incentives by appropriate regulation or sophisticated pricing mechanisms may improve the social welfare, and, in several cases, the results obtained are as good as those obtained by central planning. Using an extensive content analysis, we point to several trends in the current research and attempt to identify the research directions that are currently at the focus of the community.