Multi-Unit auctions in the procurement of electricity

Abstract

This paper reviews some multi-unit auction mechanisms that are used in the procurement of electricity. In ordinary multi-unit auctions bidders compete to buy several units of the same object from the seller, while in procurement or reverse auctions suppliers of electricity compete to sell a certain number of units. Reverse electricity auctions are used in numerous countries and they create a competitive market for electricity, instead of state-owned monopolies providing electricity at administratively set prices. In this paper we will present the most commonly used multi-unit auction forms in electricity markets. Auctions for electricity from renewable energy sources deserve special attention, since these suppliers cannot compete with large-scale producers at the present state of technology.