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Hobbs, Benjamin F.; Rothkopf, Michael H.; Hyde, Laurel C.; O’Neill, Richard P.

doi:10.1023/a:1008151712010

Cited by 74 publications

(2 citation statements)

References 19 publications

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“…Although the Vickrey auction has hardly been applied to an actual electricity market, several studies have been conducted to investigate the feasibility of applying the method to electricity markets [23][24][25]. In particular, O'Mahoney and Denny [26] proposed using the Vickrey auction as a pricing mechanism for a mandatory pool established for the liberalization of the electricity market, which can ultimately induce market participants to bid at their true marginal costs in the long term.…”

Section: Vickrey Pricing In a Uniform-price Marketmentioning

confidence: 99%

A Comparative Study of Pricing Mechanisms to Reduce Side-Payments in the Electricity Market: A Case Study for South Korea

et al. 2021

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Under marginal-cost pricing, some generators cannot recover their production costs at the market price due to non-convexities in the electricity market. For this reason, most electricity markets pay side-payments to generators whose costs are not sufficiently recovered, but side-payments present the problem of deteriorating transparency in the market. Recently, convex hull pricing and extended locational marginal pricing have been reviewed or gradually introduced to reduce side-payments. Another method is to include non-convex costs in the market price, which is applied in the Korean electricity market. Although it is not generally considered in the electricity market, the Vickrey auction method is also one of the pricing mechanisms that can reduce side-payments. The main purpose of this study is to analyze the financial impact of these alternative pricing mechanisms on market participants through rigorous simulation. We applied the alternative pricing schemes to the Korean electricity market, and the impacts are analyzed by comparing the cost aspect of an electricity sales company and the profit aspect of generation companies. As a result of the simulation study, each pricing mechanism not only differed in the degree to which side-payments are reduced but also has different effects on the type of generators.

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Section: Vickrey Pricing In a Uniform-price Marketmentioning

confidence: 99%

A Comparative Study of Pricing Mechanisms to Reduce Side-Payments in the Electricity Market: A Case Study for South Korea

et al. 2021

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“…In the pursuit of more profits, large GENCOs tend to abuse their market power by deliberately submitting bids that deviate from the truth. Investigations into mitigating market power in a single market have been exhaustive [4][5][6][7][8], and the relative design mechanisms for single-market power mitigation [9][10][11][12][13][14] have also been well-documented. In sequential markets, arbitrage opportunities will appear when prices between the contract market and the spot market are distinct [15], which is the underlying incentive for the abuse of market power.…”

Section: Introductionmentioning

confidence: 99%

Spot Market Mechanism Design for the Electricity Market in China Considering the Impact of a Contract Market

Zhang¹,

Yan²

2019

Energies

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To promote the reformation of the electricity market in China, a market mechanism that can support collaboration between the contract market and the upcoming spot market was designed in this paper. The focus of this paper was to develop a mechanism to institutionally stabilize the market by way of disciplining market power abuse through limiting arbitrage opportunities generated from multi-markets. To quantitatively describe the arbitrage opportunity, the arbitrage opportunity function (AOF) was defined. Based on inferences of the no-arbitrage principle and the AOF, a cost-based decomposition algorithm for contracts that could improve contract coverage was proposed. The incentive compatible settlement rule for the uncovered generation on the spot market was designed to properly manipulate the arbitrage opportunity. The decomposition algorithm and the settlement rule constituted the designed market mechanism. To verify the applicability and effectiveness of the proposed mechanism, the principles of incentive compatibility, individual rationality, and payment cost minimization were employed to test the designed market mechanism based on the concept of dominant policy equilibrium. This test was conducted on a fictitious case based on the IEEE-14 system. The analysis and results may provide valuable insights on market design in China based on the functional correlation between the contract market and the spot market.

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