An interactive two-stage retail electricity market for microgrids with peer-to-peer flexibility trading

•An interactive two-stage retail market coordinated with centralized energy settlement and local flexibility trading is designed for MGs.•A CC-UDLMP calculation and its equivalent transformation are proposed to internalize the cost of systematic preventive measures for uncertainty in energy settlements.•A regulated P2P-based flexibility sharing between MGs is performed to exploit the potential of DERs and save network-side reserves.•A fully distributed iterative algorithm is presented to solve the two-stage sequential game with privacy concerns and then enhance its versatility in practical large-scale cases.