Peer-to-peer energy sharing: Effective cost-sharing mechanisms and social efficiency

P2P (peer-to-peer) energy sharing allows household users to share their local energy resources (e.g., rooftop PVs, home batteries) based on an agreed cost-sharing mechanism (e.g., implemented as a smart contract over a blockchain ledger). Sharing energy resources is becoming a new form of sharing economy. This not only promotes renewable energy adoption among household users but also optimizes their energy resources efficiently. However, household users are self-interested and incentive-driven. It is not clear how to motivate them to team up for energy sharing, and what proper economic mechanisms are to incentivize them to do so in a socially efficient way. This paper sheds light on the economic principles of costsharing mechanisms for P2P energy sharing. We investigate P2P energy sharing scenarios of direct connections and grid settlement with simple cost-sharing mechanisms (e.g., proportional-split, bargaining games), and the subsequent stable coalitions, such that no group of users will deviate to form other coalitions.We characterize the social efficiency of P2P energy sharing by the strong price of anarchy that compares the worst-case stable coalitions and a social optimum.We show that the strong price of anarchy is mild, both in practice (by an extensive data analysis on a real-world P2P energy sharing project) and in theory (by a small bound in general settings). This can hence bolster the viability of P2P energy sharing.