Combinatorial Markets for Efficient Energy Management

Abstract

The deregulation of the electricity industry in many countries has created a number of marketplaces in which producers and consumers can operate in order to more effectively manage and meet their energy needs. To this end, this paper develops a new model for electricity retail where end-use customers choose their supplier from competing electricity retailers. The model is based on simultaneous reverse combinatorial auctions, designed as a second-price sealed-bid multi-item auction with supply function bidding. This model prevents strategic bidding and allows the auctioneer to maximise its payoff. Furthermore, we develop optimal singleitem and multi-item algorithms for winner determination in such auctions that are significantly less complex than those currently available in the literature.

Meeting peak electricity demand through combinatorial reverse auctioning of renewable energy

“…For instance, renewable energy grew by 66.4% in 2012 in the Brazilian market [7], and by 60% in 2013 in the Spanish market [3]. In some countries, such as Brazil and Germany, a good portion of electricity is generated from wind energy, which has almost no marginal costs [8]. Consequently, wind is preferred to other energy sources [8].…”

“…In some countries, such as Brazil and Germany, a good portion of electricity is generated from wind energy, which has almost no marginal costs [8]. Consequently, wind is preferred to other energy sources [8]. It has also been shown that the entry of new energy sources into the markets is a catalyst for economic growth [3].…”

“…Only these providers are allowed to submit partial bids because they might not be able to generate electricity all the time. Besides, it has been shown that partial bidding increases the buyers' gains [8]. When these suppliers bid for an item, we assume that they are able to allocate the electricity according to the weather forecast.…”

“…However, PBM is just an ideal model and has not been yet applied to real electricity markets. In another study [8], the authors tackled combinatorial reverse auctions with multiple units for both single and multiple items in the context of electricity retail market. They allowed partial bidding to maximize the auctioneer profit.…”

“…Our auction is sealed-bid that is it does not reveal any information about the competitors' offers in order to protect their privacy. With a sealedbid protocol, truth telling is the dominant bidder strategy [8]. Sealed auctions are simple, foster competition among bidders and prevent their collusion [17,22].…”