Truthful, Practical and Privacy-Aware Demand Response in the Smart Grid via a Distributed and Optimal Mechanism

High penetration of Renewable Energy Sources in modern smart grids necessitates the development of Demand Response (DR) mechanisms as well as corresponding innovative services for the emerging flexibility markets. From a game-theoretic perspective, the key requirements for a DR mechanism are: efficiency in terms of social welfare, practical applicability, scalability, privacy and incentive compatibility, in the sense of making it a dominant strategy for each user to act truthfully according to his/her real preferences, leaving no room for cheating. Previous works typically address only a subgroup of these requirements. In this paper, we propose a DR architecture, including a mechanism based on Ausubel's clinching auction and a communication protocol, that provably guarantee both efficiency and truthful user participation. Practicality/easiness of participation is enhanced via simple queries, while scalability and user privacy are preserved via a distributed implementation. Simulation results confirm the desired properties, while also showing that the truthfulness property becomes even more important in markets where participants are not particularly flexible.