Production equilibrium in cooperative smart hybrid renewable minigrids

In this paper, we propose a framework for modeling the production of smart hybrid renewable energy minigrids as a production possibility curve. Modeling the individual and joint production possibilities of hybrid renewable minigrids demonstrates the absolute and comparative advantages in terms of energy production that each minigrid has depending upon weather conditions and technology employed. Comparative advantage in a particular technology leads to specialization in production that guarantees mutually beneficial trading possibilities for the minigrids to mitigate the effects of weather variations on energy production. The optimum point of production or the production equilibrium that forms the basis for mutually beneficial trading is arrived at by maximizing the joint production possibility function subject to certain constraints. These constraints are given by consumer theory that prescribes various utility functions for optimizing the total energy production and modeling weather/climate variations. We graphically illustrate the computation of production equilibrium under various constraints such as output maximization during sunny or windy weather conditions. Once the total amount of energy production as stipulated by the production equilibrium has been decided, minigrids can trade towards an optimal level for their consumption. The terms of mutually beneficial trade are dictated by the marginal opportunity costs of energy production for each minigrid. Finally, we formulate the energy trading price ratio which provides the minigrids with an incentive to cooperatively exchange energy.