Smart Greedy Distributed Allocation in Microgrids
Ilai Bistritz, Andrew Ward, Zhengyuan Zhou, Nicholas Bambos
Department of Electrical Engineering, Stanford University, Stanford, CA, 94305
Abstract—We consider a microgrid that consists of N providers
and B consumers. Each provider has a certain supply and each
consumer has a certain demand. The efficiency of transmitting
energy between providers and consumers is modeled using a
bipartite graph G. Our goal is to maximize the amount of utilized
energy using a distributed algorithm that each provider runs
locally. We propose a non-cooperative energy allocation game,
and adopt the best-response dynamics for this game as our
distributed algorithm. We prove that the best-response dynamics
converge in no more than N steps to one of at most N ! pure Nash
equilibria of our game. Despite the fact that some of these Nash
equilibria are suboptimal, we are able to prove that our algorithm
achieves near-optimal performance in “almost all” games. We do
so by analyzing the best-response dynamics in a random game,
where the network is generated using a random model for the
graph G. We prove that the ratio between the utilized energy
of our algorithm and that of the optimal solution converges to
one in probability as B increases (and N is any function of B).
Using numerical simulations, we demonstrate that our asymptotic
analysis is valid even for B = 10 consumers.
Index Terms—Smart grid and cities, Game theory, Distributed
algorithms, Resource allocation, Random games.
I. I NTRODUCTION
The smart grid [1]–[6] is a collection of ideas to make
the electricity grid more efficient by incorporating renewable
sources, smart homes, smart meters and connecting all of
them using a communication network. In the smart grid,
electricity is no longer provided by a single generator via
long, lossy transmission lines; distributed generation (DG) is
a key element. Thanks to the rapid advances in renewable
energy technology, solar panels can be affordably installed
on commercial and even residential buildings. This recent
development gives rise to the concept of a microgrid: several
sources and consumers that are, at least partially, independent
of the macrogrid. Microgrids are envisioned to be one of the
key components that will enable smart cities, where energy
management is a central issue [7].
Renewable energy sources are intermittent by nature. Wind
speed and direction, shadows and passing clouds, and other
random phenomena all cause the available energy from a
renewable source to vary rapidly both in time and space. Due
to the spatial diversity, in a large network of many households
or buildings equipped with renewable energy sources, some
will fail to fully satisfy their demand and will serve as
consumers, while others will have an excess of energy and
will serve as providers. Due to the temporal diversity, the
providers from an hour ago can now become consumers and
vice versa. Moreover, solar panels produce direct current (DC),
and converting it to alternating current (AC) in order to send
it over the macrogrid incurs significant losses. Wind energy
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undergoes an even more complex conversion: wind turbines
need to convert their AC in its natural frequency to DC and
back to AC in the grid’s frequency. This also incurs significant
losses. By exchanging energy locally without exporting it
to the macrogrid, these conversion losses can be saved [8].
Both the intermittent availability and production properties
of renewable energy sources motivate an infrastructure that
supports a direct exchange of electricity between different
consumers in the same local environment [9].
Nevertheless, an infrastructure of transmission lines that
connects different consumers is not enough. Given such an
infrastructure, different allocations of energy from providers
to consumers will result in significantly different efficiencies.
The optimal allocation depends on the profile of supplies
and demands that changes with time. This calls for an effi-
cient matching between providers and consumers that uses
as much of the instantaneous available energy as possible.
This matching is not one-to-one, as each provider can provide
electricity for multiple consumers, and each consumer can
obtain electricity from several providers.
In practice, computing a providers-to-consumers matching
in such a local network is a challenging task. The supplies
and demands change with time (typically determined every
15 or 60 minutes), so there is a need to solve the problem
repeatedly with different parameters for each time interval.
The supplies and demands are private by nature, and collecting
them in a centralized fashion is not only demanding in terms
of communication and storage, but also violates reasonable
privacy requirements and is a serious vulnerability from a
cybersecurity perspective [10]. Information about the quality
of transmission lines is also naturally obtained by local mea-
surements and is not easily available at a central computer.
Thus, any practical computation of a providers-to-consumers
matching has to be distributed. For these reasons, the study
of distributed optimization algorithms for the smart grid has
become a fruitful field of research over the last decade [11].
In this paper, we propose a game-theoretic approach to
solve the fundamental providers-to-consumers energy match-
ing problem in a distributed fashion. This approach yields
a very simple and efficient greedy algorithm that does not
require any coordination between different distributed energy
resources (DERs) and converges in linear time (in N ). Even
more surprisingly, this greedy algorithm turns out to be smart
- it achieves an arbitrarily close to optimal performance for a
large enough number of consumers, for “almost all” networks.
We emphasize that in contrast to the majority of the game-
theoretic literature, we do not use game theory to model
what rational agents will do. Instead, we program agents
with local rules (utility functions) and analyze the global
performance maintained at the Nash equilibria of the game.
By proving that this global performance is satisfactory, we
establish the performance guarantees of our distributed al-
gorithm. This approach is generally known as utility design
[12]–[17]. Specifically, we study the structure of our proposed
non-cooperative game, and show that best-response dynamics
(BRD) always converge after all DERs have acted. Using a
random model for the network, we prove that for almost all
games, BRD achieve an asymptotically optimal performance
in the number of consumers B, while N may follow any
arbitrary sequence. This happens despite the fact that bad Nash
equilibria do exist in almost all networks. Finally, although B
is naturally large in practical scenarios, simulations suggest
that our analysis is valid for as few as B = 10 consumers.
A. Previous Work
Game theory is a leading candidate to be the underlying
theory for smart grid distributed algorithm design [6], [18]–
[20]. For an excellent overview of game theory for smart
grid applications, see [21]. Our work strengthens this view
by demonstrating the usefulness of random game analysis for
smart grid networks. Such an analysis has been successfully
applied to wireless networks in [15], [22], but has yet to be
introduced in the smart grid literature. An alternative approach
is to distribute the gradient computation over the network
(see [11]). While being more straightforward, this approach
requires each node to communicate large vectors (of size N B
in our case) that include data from all over the network.
There are various works dealing with the economical aspects
of local energy markets [1]–[4], [6], [23]. These works are
focused on the prices the system converges to after an auction
has taken place. Our work is substantially different since we
are interested in an energy-efficient matching of providers
to consumers, and not in a market efficient matching. There
are plenty of scenarios where energy-efficiency is the main
concern. Essentially, this is the case for any scenario where
users pay a fixed rate per unit of electricity. A virtual power
plant (VPP, see [24]) with many scattered renewable energy
sources will want to optimize its energy distribution to a vari-
ety of costumers. Another scenario is a community microgrid
[25] where private households have a long-term agreement to
exchange excesses of renewable energy between them.
B. Outline
The paper is organized as follows: in Section II we describe
the system model, formulate our objective, and describe our
distributed algorithm. We also state our main theorem that
provides theoretical performance guarantees for our algorithm.
In Section III we formulate the energy allocation game for
which we develop and analyze the BRD algorithm. Section
IV analyzes the performance of the random NE to which our
algorithm converges in a random game. Section V provides
simulation results that suggest the asymptotic analysis of our
algorithm is valid even for B = 10. Finally, Section VI
concludes the paper.
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II. S YSTEM M ODEL
We consider a microgrid with a set of consumers B =
{1, . . . , B} and a set of DERs N = {1, . . . , N }. During
each period (e.g., 15 or 60 minutes), consumer b has demand
Db ≥ 0 and DER n has supply Qn ≥ 0. It is possible that
DERs and consumers are the same type of entity, but at this
particular hour, the first group has an excess of energy while
the second requires energy. The demands can be based on
either a consumer’s current electricity usage or a prediction of
electricity usage based on the typical pattern of this consumer.
Similarly, the supplies can be based on the current stored
energy (electric vehicles and batteries [26]), or predictions of
renewable energy production for the upcoming period.
The power-loss coefficient, or the transmission efficiency,
between DER n and consumer b is denoted ηn,b , and naturally
0 ≤ ηn,b ≤ ηmax for each n, b, for some ηmax ≤ 1. The
amount of energy consumer b receives from DER n is denoted
en,b . The amount of energy DER n transmits to consumer b
is denoted an,b . Due to the transmission line loss, we have
en,b = ηn,b an,b for each n, b.
Our goal is to distributedly solve the following energy
matching problem for the period (e.g., hour) in consideration:
B N
max+ b=1 n=1 en,b
{en,b }⊂R ∪{0}
N (1)
n=1 en,b ≤ Db
s.t.∀b, n : B en,b
b=1 ηn,b ≤ Qn
where the first constraint represents the finite demand of each
consumer and the second constraint represents the finite supply
of each DER.
Note that some (or even most) of the transmission lines
might not exist, which is represented by setting ηn,b = 0.
However, if ηn,b > 0, it does not necessarily mean that there
is a direct transmission line between DER n and consumer b.
Transmitting electricity between DER n and consumer b might
involve transmitting it between different houses that serve as
relays. In a relay case, the value ηn,b will typically be smaller
than in a direct transmission. In short, ηn,b models the energy
loss of transmitting energy from n to b, possibly incorporating
different causes for these losses.
It is likely that the optimal solution to (1) does not fill all
demands {Db }. In this case, as in practice, consumers buy the
rest of their required electricity from the traditional macrogrid.
They can also postpone their demand to the next period, which
is suitable for non-immediate demands (such as operating a
washing machine or charging an electric vehicle).
The problem (1) is a linear program that can, in principal,
be solved if all the parameters were available on the same
server. However, in a practical microgrid, especially at the
scale of those anticipated to be part of future smart cities,
such a centralized solution is infeasible. Since problem (1) is
solved every 15 (or 60) minutes with varying supplies and
demands, it is highly desirable to avoid sending all these
parameters from all nodes to a centralized server. Tracking the
quality of the transmission lines all over the microgrid is also
 N=2 B=4
Q1=10kWh D1=5kW
0.9
0.8
1
D2=7kW
0.8
Q2=15kWh
0.7
D3=10kW
0.3
0.95
0.9
D4=3kW
Fig. 1: An example for a network with N = 2 and B = 4.
Algorithm 1 Smart Greedy Distributed Energy Allocation
Asynchronously, each DER runs
1) Initialize Qres = Qn .
2) Find b∗ that maximizes  to Dres,b > 0.
 ηn,b subject
Db∗
3) Transmit Δ = min ηn,b∗ , Qres energy to consumer
b∗ , so now Dres,b∗ = Dres,b∗ − Δηn,b∗ .
4) Update Qres = Qres − Δ.
5) If Qres > 0 and maxDres,b > 0, then return to Step 2.
b
End
a burden. Another barrier is computational complexity, since
solving linear programs with thousands of variables (or more)
in reasonable time is still a challenge. The demands disclose
information about private households, so gathering all this
information in a single place may violate their privacy. Last but
not least, cyber-security is one of the most important issues
in a fundamental network such as the grid [10]. Storing all
the information of the microgrid at the same place offers poor
information protection. Even worse, a central computer that
computes the optimal solution will need to send commands to
all the components of the microgrid to implement this solution.
This is a serious security vulnerability since such a central
computer has control over all the microgrid.
A. Distributed Energy Allocation
We propose a (smart) greedy distributed algorithm to solve
Problem (1), described in Algorithm 1. In Algorithm 1, DERs
act asynchronously over time. On its turn, a DER chooses its
transmission profile in order to maximize the total received
energy for its consumers. With time, the consumers start
to gradually fill their demands. The energy consumer b has
received from DER n up to time (step) t is denoted en,b (t).
The residual demand of consumer b at time t is defined as
Dres,b (t)  Db − n en,b (t).
In order to run Algorithm 1, each DER only needs to know
its own supply, the residual demands of the consumers it is
connected to and the efficiency of transmitting energy to each
of them. No knowledge of the supplies of other DERs or other
efficiencies in the network is required. Furthermore, DER n
can actually transmit energy on its turn so its action is not only
a message passing. Thanks to Lemma 6, an energy transaction
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chosen by a specific DER in Algorithm 1 is never canceled in
order to enable a better transaction of another DER instead.
Lemma 6 also establishes that Algorithm 1 converges after N
steps (one for each DER). The computational complexity of
Algorithm 1 is O (B) for each DER.
Our main theorem gives theoretical performance guarantees
for Algorithm 1. Both the algorithm and the proof of the
theorem below are based on a game-theoretic analysis that is
given in Section III and Section IV. Informally, the theorem
states that, for a large enough number of consumers (B)
Algorithm 1 is (arbitrarily) close to optimal in almost all
networks. The simulations in Section V complete the picture
by showing that “a large enough B” is approximately B = 10.
Theorem 1. Let ηn,1 , ..., ηn,B be i.i.d. variables with distri-
bution Fn,η (x), independently generated for each n. Let E ∗
be the optimal solution to (1) for the realization of {ηn,b }. Let
E (NB ) denote the total received energy after all NB DERs
have run Algorithm 1, with any arbitrary scheduling. Then,
for any 0 < ρ < 1 and for any arbitrary sequence NB
 
E (NB )
lim Pr ≥ ρ = 1. (2)
B→∞ E∗
Proof: The proof uses Lemma 8 to argue that each DER
n is highly likely to contribute almost ηmax Qn to E (NB ). The
details are omitted due to page constraints.
Theorem 1 is applicable for many plausible models for
the efficiencies in a network. For example, a link (direct or
indirect) can exist between DER n and consumer b with
probability pn . The efficiency of a link might be a function
of the length of the transmission line, the random number of
hops required to transmit energy from n to b, and so on.
III. T HE E NERGY A LLOCATION G AME
Our algorithm is nothing but asynchronous best-response
dynamics of a certain non-cooperative game. In this section,
we define the energy allocation game (EAG) and analyze its
structure. Many possible non-cooperative games could have
made sense as a model. Our motivation to choose a specific
one is not to model what rational agents will do, but to find
a good basis for a distributed algorithm that solves (1).
Our designed game, defined as follows, is a very natural
candidate to distributedly optimize (1).
Definition 2. The Energy Allocation Game (EAG) is a
normal-form game with N DERs as the players and B passive
consumers. Let a = (a1, , ..., aN ) denote the strategy profile.
The strategy space of DER n is the following set of vectors


An = an | 0 ≤ ηn,b an,b ≤ Dres,b (a) , an,b ≤ Qres,n (a)
b
(3)
where Dres,b (a) is the residual demand of consumer b in a
and Qres,n (a) is the residual supply of DER n in a. The utility
of DER n in a is
B

un (a) = ηn,b an,b . (4)
b=1
 One of the most common solution concepts in game theory
is that of a Nash equilibrium. It is of great interest in our
case, since the pure Nash equilibria are the stable points of
best-response algorithms such as Algorithm 1.
 Q2=1
Definition 3. A strategy profile a∗n , a∗−n ∈ A
1 × ... × AN 0.9
Nash equilibrium (NE) if un a∗n , a∗−n ≥
is called
a pure
∗
un an , a−n for all an ∈ An and all n ∈ N .
The main motivation to use the BRD as our algorithm is
the fact that our game is a potential game, defined as follows.
Definition 4. G =< N , {An }n∈N , {un }n∈N > is a general-
ized ordinal potential game if there exists a function Φ : A1 ×
... × AN → R such that for each n ∈ N and for all an , an ∈
An and a−n ∈ A−n , if un (an , a−n ) , −un (an , a−n ) > 0
then Φ (an , a−n ) − Φ (an , a−n ) > 0.
The next lemma verifies that our game is indeed a general-
ized ordinal potential game.
Lemma 5. The EAG is a generalized ordinal potential game
with the potential function
 N
B  B 
 N
E (a) = an,b ηn,b = en,b
b=1 n=1 b=1 n=1
Proof: The proof is immediate since each utility appears
in Equation (5), and is omitted due to page constraints.
In addition to being a generalized ordinal potential game,
the NE of our game have the following structure. This lemma
is the key for our random game analysis of Section IV.
Lemma 6. The BRD of an EAG converge in N steps (one
for each DER) to a pure NE, out of at most N ! possible pure
NEs.
Proof: The key observation for this result is that the
residual demands {Dres,b } never increase. The proof follows
by induction and is omitted due to page constraints.
The lemma above makes the implementation of our game
much easier. Without this result, the DERs would have needed
to distributedly detect a NE which would delay the energy
transmission to the consumers. Since each DER is guaranteed
to act only once before the NE is reached, it can transmit the
actual energy immediately on its turn and does not need to
worry that this transmission might not be part of a pure NE.
The lemma above also states that each scheduling results in
a pure NE. This enables running Algorithm 1 anachronistically
without coordinating between players, since each player wants
to act only once. Any random asynchronous mechanism will
generate one of the N ! possible schedulings. The following
simple lemma suggests that one of these schedulings might
even lead to the optimal solution of Problem (1).
Lemma 7. The strategy profile that consists of the optimal
solution of Problem (1) is a pure NE of the EAG.
Proof: If a DER could have improved its utility, the ob-
jective of Problem (1) would have increased without violating
the constraints, which contradicts the optimality.
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Q1=1 D1=1
0.9
1 1
1
D2=1
2 2
Fig. 2: A network with a suboptimal NE.
It is well known that the BRD converge in potential games
[27]. This is also true for generalized ordinal potential games,
since as long as there exists a player that can improve its utility,
this player can also increase the potential function. After a
finite amount of such improvements, we must reach a strategy
profile in which all players cannot increase their utility by
switching an action, which is a NE by definition. This follows
since a bounded potential function cannot increase forever.
Unfortunately, in generalized ordinal potential games, a NE
does not necessarily maximize the potential function. Hence,
the convenient fact that our potential function is the objective
of Problem (1) does not help us. The potential function
(5) increases only until a NE is reached, which does not have
to be the optimal solution of Problem (1). In Fig. 2 we depict
a simple example where best-response can lead to a bad NE.
The optimal solution in this case is a1,1 = 1, a1,2 = 0 and
a2,1 = 0.1, a2,2 = 0.9 which results in e1 = 0.9 + 0.1 = 1
B N
and e2 = 0.9 · 0.9 = 0.81, so b=1 n=1 en,b = 1.81.
However, if DER 2 were to perform its best-response first,
it would have transmitted a1,2 = 1 and a2,2 = 0, which is a
B  N
NE with b=1 n=1 en,b = 1, where only 55% of the energy
is utilized compared to the optimal solution.
IV. R ANDOM E NERGY A LLOCATION G AME
We cannot guarantee in general to which of the at most N !
NE of the EAG that Algorithm (1) will converge. From the
traditional game-theoretic perspective, this means that the price
of anarchy of our game might be high. It is simply possible
that the BRD will converge to a bad pure NE.
This pessimistic conclusion is in sharp contrast to the
striking fact that although examples like in Fig. 2 always exist,
they are very rare. In other words, while implementing the
BRD of our EAG on some network in practice, one is highly
unlikely to encounter a bad NE. This can be easily verified in
simulations, as we present in Section V.
This discrepancy between the traditional game-theoretic
answer and what actually happens calls for a more subtle
approach, which we employ in this section. We generate a
network at random by generating {ηn,b } for each DER n
independently, with a distribution Fn,η (x). We show that as B
increases, the probability that any scheduling leads to a near-
optimal solution increases. This will analytically establish that
the probability that BRD in a random network will result in a
bad NE vanishes as B → ∞. The idea of analyzing random
games over networks to achieve significantly better bounds
was first introduced in [15].
 The fact that the BRD of the EAG converge after each player
has acted only once, proven in Lemma 6, is very useful for
the analysis of the random EAG. Thanks to this property, our
random model is equivalent to generating {ηn,b } at random
sequentially, observing the realizations for each DER only on
its turn. If any player had acted more than once before the NE,
its second turn would have depended on the values of {ηn,b }
the auction algorithm has an
that were determined on that player’s first turn. Exploiting this
property, the following lemma bounds the expected utility of
each DER over the randomness of its {ηn,b } values.
N B
Lemma 8. Let 0 < ρ < 1 and E (t)  n=1 b=1 en,b (t).
DER transmits all of its energy to a single consumer such that
the overall utilized energy is maximized. The weight of each
possible connection for the matching also took into account
the demand and supply of that connection. While achieving
reasonable performance, the performance of Algorithm 1 is far
better. The convergence of Algorithm 1 is also much faster,
as it requires N iterations while
expected running time of O N 3 iterations.
An interesting special case of networks is when each
DER is connected only to nearby consumers, using relatively
short, dedicated, high-quality transmission lines. In Fig. 3c we
present the histogram of the ratio between the performance of
Choose any schedule where the DER acting  on turn
t is
 Qn(t) Algorithm 1 and that of the optimal solution for N = B = 50.
n (t). Let D = B1 Db and define B̃ (t) = (1−ρ)D . Also The demand of all consumers was Db = 1 and the supply
 
let ηn,(B−B̃(t)) be the B̃ (t) + 1 -largest variable among of all DERs was Qn = 1. In this experiment, we generated
ηn,1 , ..., ηn,B . Define the following deterministic time at random a bipartite graph with degree d = 11 for each
 t+1 DER. Each DER was connected to d = 11 neighbors using
ηmax t =1 Qn(t ) ηn,b = 1. Algorithm 1 converged to at least ρ = 0.9 of the
τ (ρ) = min t | B > ρ or t = N . (6)
optimal solution in all networks. When applied to this kind of
b=1 Db
networks, our results provide insight about how connected a
Then for all t ≤ τ (ρ) we have for a sufficiently large B that network should be in order to efficiently utilize a target portion
 
of the available energy in the microgrid.
E {E (t) − E (t − 1)} ≥ Qn(t) E ηn,(B−B̃(t)) . (7)

Proof: The proof uses the fact that regardless of the VI. C ONCLUSIONS
current Dres,b (t) profile, on expectation each consumer still We studied the problem of distributed energy allocation
needs D − Be given E (t − 1) = e. The details are omitted due between providers and consumers that are located in the same
to page constraints. geographical region. Our goal was to utilize as much local
V. S IMULATION R ESULTS energy as possible, minimizing the electricity bought from the
macrogrid. We have proposed a smart and greedy algorithm
The importance of our analysis of the random EAG is
that consists of the best response of each player in a designed
twofold. First, it explains why in almost all networks our
energy allocation game (EAG). Although the EAG may have
algorithm achieves near-optimal performance, despite the fact
a Nash equilibrium (NE) with bad performance, we have
that bad NE do exist. Second, it provides analytical perfor-
analyzed the performance of the best-response dynamics in
mance guarantees. The analysis is asymptotic in the number
a random EAG, and shown that it is asymptotically optimal in
of consumers B, but that does not mean that we require B
almost all games with respect to the number of consumers.
to be very large. It only means that the probability for good
In a more general scenario, the supplies and demands might
performance improves with B. Additionally, N does not have
only be available in an asynchronous manner and subject to
to be smaller than B, and can be any function of B (e.g.,
prediction errors. An interesting research direction is employ-
N = B). In this section, we numerically demonstrate the
ing the learning algorithms introduced in [29]–[31] to converge
performance of Algorithm 1, and show that our analytical
to a NE of the EAG even in this case.
findings already hold for B = 10.
For each instance of supplies and demands, some of the
In Fig. 3a we present the histogram of the ratio between the
supplies might not be utilized and some of the demands are not
performance of Algorithm 1 and that of the optimal solution
fully satisfied. Since energy storage is limited, only a certain
for N = 5 and B = 10. Both the demands and supplies
amount of excess can be stored for later usage or transmission.
were random integers between 1 and 5. The efficiency ηn,b
Additionally, some of the energy demand in a given time
between DER n and consumer b is modeled as 1 − X where
slot is deferrable and can be postponed to the next time slot.
X is an exponentially distributed variable with expectation 0.2.
This gives rise to a dynamic problem where the goal is to
The results are dramatic, as ~97% of the realizations resulted
maximize the utilized energy over time. We conjecture that
in more than 95% of the optimal solution. Our results are
our instantaneous algorithm could serve as a building block to
especially surprising considering the fact the bad NE exist
solve this dynamic problem.
in almost all realizations. Nevertheless, our analysis fully
explains this seemingly surprising result.
ACKNOWLEDGMENTS
For a performance comparison, in Fig. 3b we present the
ratio of the performance of the optimal one-to-one matching This research was supported by the Koret Foundation grant
for the same scenario. Such a matching can be computed dis- for Smart Cities and Digital Living and by the Bits & Watts
tributedly using the algorithm in [28]. In this algorithm, every Initiative at Stanford University.

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 250
200
150
Frequency
Frequency
100
50
0 0
0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 0.3
Ratio to Optimal
(a)
Fig. 3: The histogram of the ratio to optimal of: our performance (in (a)), the optimal one-to-one matching’s performance (in
(b)), for N = 5 and B = 10. Subfigure (c) shows the ratio of our performance and the optimal performance, for N = B = 50,
where each DER is only connected to d = 11 consumers. All histograms are over 1000 realizations.
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