Mechanism design and auctions for electricity networks

Abstract

In this chapter, we present some key aspects of wholesale electricity markets modeling and more specifically focus our attention on auctions and mechanism design. Some of the results stemming from these models are the computation of an optimal allocation for the Independent System Operator, the study of equilibria (existence and uniqueness in particular) and the design of mechanisms to increase the social surplus. More generally, this field of research provides clues to discuss how wholesale electricity market should be regulated. We begin with a general introduction and then present some results we obtained recently. We also briefly discuss some ongoing related research. As an illustrative example, a section is devoted to the computation of the Independent System Operator response function for a symmetric binodal setting with piece-wise linear production cost functions.