IEEE Electrification - December 2020 - 89

For privacy concerns, MGMCs do not want to reveal
their proprietary information (e.g., DER generation quantities and costs) to other MGMCs. Therefore, a distributed
approach is developed for MGMCs to attain optimal energy trading results while protecting their privacy. Using the
distributed approach, the MGMCs will strategically bargain
for adjusting their bids/offers until they reach optimal
energy trading results (i.e., energy quantity and price). The
distributed approach will offer the following attributes: 1)
A converging and distributed bargaining process among
participating MGMCs must be attainable; otherwise, the
MGMCs do not have an incentive to bargain. 2) A stable
outcome should be available in the bargaining process in
which the MGMCs will not find a more economically preferable outcome.
Therefore, an iterative distributed approach is designed
as follows. First, the MGMCs that want to trade with others publish their bids/offers. Second, the MGMCs choose
their favored bids/offers published by the other MGMCs. If
the published bids/offers are not acceptable, the participating
MGMCs may not choose any of them. The MGMCs adjust
their bids/offers according to the P2P energy trading results.
For instance, if the selling MGMCs receive a supply bid that is
higher than their surplus energy, the selling MGMCs could
increase their energy prices for making a higher payoff. The
procedures will be terminated when all of the MGMCs are
satisfied with the energy trading results. Accordingly, the
competitive behavior among buyers and sellers is modeled
by a noncooperative multileader, multifollower Stackelberg
game, where the MGMCs optimize the energy trading quantity and price by solving the game problem.
Figure 11 illustrates the use of blockchain in the proposed P2P energy trading process among MGMCs. In practice, the participating MGMCs may lack a sufficient market
knowledge to quickly submit reasonable bids/offers in a
dynamic energy market. Therefore, it is a great challenge
to implement a viable procedure for the MGMCs to attend
the P2P energy trading market. The introduction of blockchain and smart contracts makes it possible to automate
energy trading interactions for the MGMCs in a dependable and secure fashion. In Figure 11(a), the MGMCs
exchange bids/offers with each other in power systems.
However, in Figure 11(b), the MGMCs use smart contracts to achieve automatic energy trading in the blockchain. Each MGMC publishes a smart contract through
its MGMC blockchain and provides the smart contract a
unique address, to which other smart contracts can
have access. In addition, the MGMCs will preset their
rules in a smart contract (e.g., the selling energy price
cannot be lower than US$10/MW). Accordingly, smart
contracts will be triggered and executed automatically
for participating MGMCs in the P2P transactive energy
trading. The smart contracts will read the data (e.g., the
available DER outputs) stored in the MGMC blockchains
and automatically calculate bids/offers according to the
preset rules in the smart contracts. Subsequently, the

smart contracts will be encrypted with their private
keys as digital signatures to communicate with one
another for energy trading.
When individual smart contracts receive bids/offers
from other smart contracts, they will automatically calculate the corresponding energy trading results. If the results
do not meet the preset expectations in the smart contracts, the smart contracts will upgrade their bids/offers
and communicate them to the other smart contracts for
energy trading. For instance, if the MGMC is scheduled to
sell less energy than expected, owing to high energy prices, the smart contract will automatically reduce its energy
price for selling more energy. If the proposed P2P energy
trading results have met the preset expectations of the
MGMCs in their smart contracts, the smart contracts will
terminate the energy trading process and publish the optimal P2P energy trading results. Then, the smart contracts
will automatically execute market settlements based on
the P2P energy trading results. The energy trading results
will be recorded by the MGMC blockchains, which provide
tamper-proof characteristics for these results to the participating MGMCs.

Upper Level DSO Blockchain
Figure 12 depicts the upper-level DSO blockchain for the
transactive energy management in networked MGs. At the
upper-level DSO blockchain, the DSO uses the MGMC trading results to determine the distribution network reconfiguration. In Figure 12, each MGMC submits its equivalent
load/source data blocks to the DSO for privacy concerns.
The MGMCs encrypt the data blocks with their privacy
keys to indicate the sources of their data blocks, which are
recognized and stored by the DSO using the MGMCs' public key. Accordingly, the DSO applies the optimal power
flow model for the distribution network reconfiguration to
facilitate the P2P energy trading transactions.
In Figure 12, if there are any network violations, the
DSO will submit the prescribed transactive market trading
adjustments to each MGMC to revise the P2P energy trading results accordingly. Here, the P2P energy trading
adjustment request is formulated as a smart contract,
which is first stored in the DSO blockchain and then submitted to the MGMC blockchains. The DSO will encrypt
each MGMC's smart contract with their public key to
ensure the privacy of the smart contracts. The smart contract will be self-executable in the MGMC blockchain to
apply the necessary revisions in the P2P transactive energy trading results. This iterative process between the
upper- and lower-level blockchain will continue until the
network security is maintained as part of the calculation
of the optimal P2P energy trading in the networked MGs.

Conclusion
With the increasing penetration of DERs, power distribution systems are undergoing a significant transformation from conventional inactive distribution systems

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IEEE Electrification - December 2020

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