The potential of Smart Grid in bringing about a revolutionary change in the production, distribution, and utilization of power has generated much attention among producers and consumers of electric power, policy makers as well as researchers. However, before a smart grid can become fully functional, it requires technological advancements in a number of interdisciplinary domains. In particular, the usage of renewable energy sources is envisioned to result in a massively distributed power generation and distribution system composed of a large number of generating stations operating on disparate renewable technologies. Even though smart grid facilitates run-time optimal allocation of power via extensive instrumentation and information accessibility, the process of optimal power routing becomes challenging due to the massively distributed nature of generation facilities and consumption sites, and due to uncertainty caused by inherent random fluctuations in generation. In this paper, a Market Based technique has been presented for carrying out the optimal allocation for efficient utilization of the energy produced in a Smart Grid. The Market Based Resource Allocation is inspired by concepts from the economic market, where resources are allocated to activities through the process of competitive buying and selling. In the proposed technique, the energy consumers act as the potential energy buyers and the energy producers act as the energy sellers. The paper evaluates the proposed Market Based technique via a number of simulated scenarios of energy consumers and producers in a Smart Grid. The proposed technique optimizes the transmission loss of electric power distribution. Simulation results of the proposed approach are presented at the end of this paper.

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