A Decentralized Mechanism for Computing Competitive Equilibria in Deregulated Electricity Markets
0
Citation
18
Reference
20
Related Paper
Abstract:
With the increased level of distributed generation and demand response comes the need for associated mechanisms that can perform well in the face of increasingly complex deregulated energy market structures. Using Lagrangian duality theory, we develop a decentralized market mechanism that ensures that, under the guidance of a market operator, self-interested market participants: generation companies (GenCos), distribution companies (DistCos), and transmission companies (TransCos), reach a competitive equilibrium. We show that even in the presence of informational asymmetries and nonlinearities (such as power losses and transmission constraints), the resulting competitive equilibrium is Pareto efficient.Keywords:
Competitive equilibrium
Operator (biology)
Duality (order theory)
Perfect competition
Market mechanism
Cite
The burgeoning integration of distributed energy resources (DER) poses new challenges for the economic and safe operation of the electricity system. The current distribution-side policy is largely based on mandatory regulations and incentives, rather than the design of a competitive market mechanism to arouse DERs to freely compete in the retail market. To address this issue, we proposed a transactive retail market mechanism to attract the active participation of profit-driven DER retailers in a deregulated way. Considering the limited competitive property of the retail market, a bi-level DSO-dominated framework is constructed to simulate the virtual game between distribution system operator (DSO) and DER retailers. Specifically, the flexible interval pricing of retailers is modeled as a series of binary revenue constraints to influence the DSO's centralized economic dispatch decisions, where the time-varying distribution locational marginal price is adopted to settle energy activities at different locations over the time horizon. Due to the uncertain power flow path during the coordinated decision-making process, we proposed a general undirected second-order cone-based AC radial power flow model and provided sufficient conditions to ensure its exactness. Also, we applied a series of approximation and relaxation techniques to transform the bi-level mixed-integer quadratic framework with highly discrete induced domains into a solvable mixed-integer semidefinite programming problem. It is demonstrated in the case study that the proposed mechanism can not only improve market efficiency but also eliminate market power and the resulting market failures.
Market mechanism
Energy market
Cite
Citations (21)
Under the current European market environment, transmission companies have to decide network expansion by maximizing social welfare. However, generation companies (GENCOs) decide their capacity expansion with the aim of maximizing their own profit. This process, in addition to the increasing penetration of renewable energy, storage and distributed generation, might represent a rupture between short and long-term signals. Therefore, this paper proposes a bi-level formulation for the generation and transmission coordination problem (GEPTEP). We consider a proactive framework in which a centralized TSO represents the upper level while the decentralized GENCOs, that trade in the market, represent the lower level. A case study is presented to evaluate different policy planning objectives. Additionally, the planning results of the bilevel framework (considering both perfect competition and Cournot oligopoly in the lower level) are compared with a traditional cost minimization framework.
Bilevel optimization
Cite
Citations (4)
The incentive power market may lead to a high information cost if it is not informationally efficient. The paper analyzes the characteristic of the generation side power market mechanism model based on the designing economic mechanisms theory by the three GENCOs (Generation Companies) case. The result of analysis is that the mechanism model has four main features: the informationally efficient which means that the mechanism meets requirements of the observational efficiency, the communication efficiency and the low complexity of computing; the incentive compatibility which indicates that the resource allocation of the power market is Pareto Optimality and the social benefit achieves the maximization when GENCOs also achieve profit maximization; the decentralized decision which refers to preserving the privacy information of GENCOs; encouragement of competition which suggests that the mechanism encourages GENCOs to compete with each other healthily. DOI: http://dx.doi.org/10.11591/telkomnika.v11i4.2370 Full Text: PDF
Power market
Market Analysis
Power analysis
Economic Analysis
Cite
Citations (0)
Profit maximization
Restructuring
Deregulation
Maximization
Electric Power Industry
Electric Utility
Cite
Citations (93)
Game Theory is a long standing method of analysing the way in which participants interact within a market space, recently agent based approaches have been utilised to understand even more about these interactions. This agent based approach can be utilised to understand very complex market designs, such as those for an electricity market, with there being potential room for identifying potential problems with market power. By looking at the way in which a set of intelligent agents form optimal bids in a constrained electricity market, it is possible to identify where potential weaknesses are in the market design. Agents simulate the market repeatedly, aiming to find the Nash-Equilibrium point for the the market at the given time step. By predicting other agents reactionary moves, they can identify the best course of action, with this information it is possible to identify the contributing factors that have caused the agent's choice of action. As such, this work sets out to identify where and when an electricity market can be forced into undesirable situations, only as a result of optimised bidding and existing market constraints.
Cite
Citations (1)
Worldwide energy markets have been on a path toward deregulation for several decades. These markets have proven to be difficult to design and run because of their repetitive nature and the externalities provided by reliable grid operation. In a deregulated market environment, our experiments suggest that market participants will pursue their own profit-maximizing objective rather than use an objective that reflects social benefit. Multiagent simulation is useful for gaining insights into market participant behavior under various rules. In this way, market rules can be tested for efficacy and efficiency. In this paper, an agent based on a double-layer diffusion model developed elsewhere is tested and its effectiveness reported
Deregulation
Externality
Agent-Based Model
Energy market
Cite
Citations (1)
Deregulated electricity markets allow competition over the electricity price among the power companies. However, in an oligopolistic environment, the strategic behavior of the power companies in the electricity market may lead to collusive opportunities. The independent system operator (ISO) is an authorized entity which is responsible for administrating the electricity market. Therefore, ISO shall be able to detect and avoid collusive opportunities among generators. In this study, we propose a metaheuristics approach to assist ISO in the decision-making process to prevent collusions. We develop a method, based on principles of genetic algorithm to detect the collusive opportunities in deregulated electricity markets. We test our algorithm on three problems of varying size. Our results are promising in terms of both speed and accuracy. For the large-scale problem, our algorithm works much faster than the existing alternatives in the literature.
Operator (biology)
Electricity Price Forecasting
Cite
Citations (3)
Market participants may employ potential market power improperly in energy trading. On the other hand, integrations of distributed energy resources (DER) are highly complex since it entails the optimal coordination of a diverse portfolio of DER under multiple sources of uncertainty. A large number of possible stochastic realisations that arise can lead to complex operational models that become problematic in real-time market environments. Although recent works have explored the impacts of DER on numerous aspects of grid operation and planning, its role in imperfect competitive energy markets has not been investigated nonetheless. This article proposes the theoretical and quantitative analysis of the withholding strategies for the utility corporations with the integration of DERs for the first time and the corresponding market power effects on utility corporation's profits and market prices. The quantitative demonstration is supported by a bi-level model with the optimal company profit for the upper level and the market clearing for the lower level. This bi-level problem can be solved directly when a single-level problem is obtained with a mathematical program with equilibrium constraints (MPEC). Numerical studies are implemented on a wholesale market with the day-ahead horizon and hourly resolution.
Market clearing
Corporation
Energy market
Cite
Citations (7)
Cite
Citations (0)
The paper studies on the core philosophy and algorithm of the designing economic mechanisms theory, a new algorithm of designing incentive compatible power market mechanisms is proposed, a generation side power market mechanism model which has features of inventive compatibility, informationally efficient and decentralized decision is constructed. The power market based on the designing economic mechanisms theory can lead to the Pareto Optimality of the resource allocation; meanwhile GENCOs are permitted to pursue profits maximization. The paper is in two parts. Part 1 focuses on the process of constructing a generation side power market competitive mechanism model based on the designing economic mechanisms theory. Part 2 presents the characteristic analysis of the generation side power market competitive mechanism. DOI: http://dx.doi.org/10.11591/telkomnika.v11i4.2369
Power market
Cite
Citations (0)