Equilibrium prices supported by dual price functions in markets with non-convexities

Bjørndal, Mette; Jørnsten, Kurt

doi:10.1016/j.ejor.2007.06.050

Cited by 65 publications

(33 citation statements)

References 10 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Morales et al (2012) shows that, if generating units are fully dispatchable from zero to their maximum capacities (the problem of pricing in markets with non-convexities is not treated here; see e.g. Bjørndal & Jörnsten (2008 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 for further information on this topic), the energy-only settlement scheme (5) under the stochastic dispatch model (3) guarantees cost recovery for flexible producers only in expectation. This expectation is, besides, contingent on the probabilistic characterization of the stochastic production at a marketwide level, which is in possession of the TSO and out of the control of the individual producers.…”

Section: Energy-only Market Settlementmentioning

confidence: 99%

Electricity market clearing with improved scheduling of stochastic production

Morales

Zugno

Pineda

2014

European Journal of Operational Research

105

122

View full text Add to dashboard Cite

In this paper, we consider an electricity market that consists of a day-ahead and a balancing settlement, and includes a number of stochastic producers. We first introduce two reference procedures for scheduling and pricing energy in the day-ahead market: on the one hand, a conventional network-constrained auction purely based on the least-cost merit order, where stochastic generation enters with its expected production and a low marginal cost; on the other, a counterfactual auction that also accounts for the projected balancing costs using stochastic programming. Although the stochastic clearing procedure attains higher market efficiency in expectation than the conventional day-ahead auction, it suffers from fundamental drawbacks with a view to its practical implementation. In particular, it requires flexible producers (those that make up for the lack or surplus of stochastic generation) to accept losses in some scenarios. Using a bilevel programming framework, we then show that the conventional auction, if combined with a suitable day-ahead dispatch of stochastic producers (generally different from their expected production), can substantially increase market efficiency and emulate the advantageous features of the stochastic optimization ideal, while avoiding its major pitfalls.A two-node power system serves as both an illustrative example and a proof of concept. Finally, a more realistic case study highlights the main advantages of a smart day-ahead dispatch of stochastic producers.Dear Editor of European Journal of Operational Research, Today's electricity market design is the result of adapting traditional practices, such as unit commitment, economic dispatch or contingency analysis, to a competitive structure. These practices were conceived in view of a generation mix mostly formed by dispatchable power plants, and are now to be revisited so that stochastic producers can enter the competition in a fair and efficient manner.In this line, researchers have recently advocated a market-clearing mechanism that co-optimizes the forward (day-ahead) and the anticipated real-time energy dispatches using stochastic programming. Even though, ideally, this mechanism attains maximum market efficiency, it results in an energy-only market settlement that requires flexible producers to accept economic losses for some realizations of the stochastic production, which raises concerns on its practical applicability.Starting from this point, this paper shows that, if stochastic production is conveniently scheduled in the day-ahead market, the conventional settlement of this market can notably approach the behavior of the stochastic ideal, while sidestepping its theoretical drawbacks. To this end, we construct a bilevel programming formulation that determines the optimal value of stochastic production that should be considered to clear the day-ahead market under the conventional settlement.We firmly believe that this research work could positively contribute to your Journal. We thank you in advance for considering this...

show abstract

Section: Energy-only Market Settlementmentioning

confidence: 99%

Electricity market clearing with improved scheduling of stochastic production

Morales

Zugno

Pineda

2014

European Journal of Operational Research

105

122

View full text Add to dashboard Cite

show abstract

“…Under such pricing scheme, the vector of market-clearing prices λ is defined as the vector of marginal costs. It is worth emphasizing that the theory of marginal pricing relies on the assumption of convexity of the optimization, which is not held in market clearing due to the presence of binary scheduling variables v. Such issue has triggered extensive research on non-convex pricing for generation scheduling problems (see Motto and Galiana 2002;O'Neill et al 2005;Bjørndal and Jörnsten 2008;Morales et al 2012;Ruiz et al 2012). A widely adopted solution, however, is to derive λ from an optimization-based tool wherein binary variables have been fixed to their optimal values (see Arroyo and Galiana 2005a;Galiana et al 2005;Gómez-Expósito et al 2008).…”

Section: Bilevel Programming Formulation Under Marginal Pricingmentioning

confidence: 99%

Bilevel programming for price-based electricity auctions: a revenue-constrained case

Fernández-Blanco

Arroyo

Alguacil

2015

EURO Journal on Computational Optimization

View full text Add to dashboard Cite

This paper describes the application of bilevel programming to a class of real-life problems in the field of electric power systems. Within the context of electricity markets, market-clearing procedures, i.e., auction models, are used by an independent entity to schedule generation offers and consumption bids as well as to determine market-clearing prices. This paper addresses a mathematically challenging type of auction, denoted as price-based market clearing, wherein, as a distinctive feature, market-clearing prices are explicitly incorporated in the formulation of the optimization process. This paper shows that bilevel programming provides a suitable modeling framework for price-based market clearing. Furthermore, based on practical modeling aspects, an equivalent single-level primal-dual transformation into a mixedinteger program can be implemented. Such transformation relies on the application of duality theory of linear programming. The bilevel programming framework for price-based market clearing is applied to a revenue-constrained auction model similar to those used in several European electricity markets. As a major contribution, bilinear terms associated with both generation revenue constraints and the duality-based transformation are equivalently converted into linear forms with no additional binary variables. Simulation results show the effective performance of the proposed approach and its superiority over current industry practice.

show abstract

“…In the last couple of years researchers have proposed different mechanisms to find market clearing prices, or an out of market mechanism, such that the solution obtained from the pool is the same as the solution when each of the generators solves its own profit maximization as price takers [7], [10], [14], [15].…”

Section: Introductionmentioning

confidence: 99%

Alternative pricing approach for the lumpy electricity markets

Araoz-Castillo

Jørnsten

2010

2010 7th International Conference on the European Energy Market

View full text Add to dashboard Cite

Uniform marginal price schemes in a pool-based electricity market cannot clear the market. In this paper, we propose an alternative pricing approach for the day-ahead electricity market in a power pool auction assuming inelastic demand. The approach employs a Semi Lagrangean Relaxation (SLR) technique and a second price auction. We show that the method proposed accommodates the non-convexities that characterize the electricity market and provides a shadow value that represents the price to be announced for the second price auction. The SLR closes the integrality gap, while the second price auction guarantees that only those generators that can fulfill the demand without losses are engaged. The second price auction provides the final price for the day-ahead electricity. The demand is fulfilled at minimum cost and all generators committed cover their own costs. We argue that these prices are market clearing and provide market equilibrium. IndexTerms--Integer programming, mathematical programming, operations research, power generation dispatch, power generation economics, power generation scheduling I. INTRO DUCTIONT HE deregulation of the electricity market has taken place in many countries around the world. Each country has decided its own pace and has developed different market designs.Before the deregulation of the electricity markets, some researchers pointed out the difficulties to set a completely deregulated spot electricity market, specially due to the special technical characteristics that the electricity market has [1]. Indeed, many deregulated electricity structures have kept a centralized unit commitment and dispatch problem solved by an ISO (Independent System Operator or Market Operator), who sets the quantities that the generators should produce and then sets the electricity price. In a typical electricity market, the suppliers and consumers will submit their information regarding their bids and offers; the ISO will optimize an objective function which will provide the optimal quantities that should be bought and sold by the corresponding market participants; in addition the ISO has to announce the market price that will lead to market clearance.In those markets where there is a centralized unit commitment, where the ISO makes binding commitment decisions, there are already some issues related with equity, incentives and efficiency [2]. Some of the problems are due toThe authors are with the the difficulties of finding a market clearing price, and some others of fmding the optimal dispatch and units that shall be required to produce. The latter are due to the technique used to solve the UCDP (Unit Commitment Dispatch Problem).The UCDP is a well known problem where the ISO needs to find the least cost generators whose total energy production meets total demand within the security limits, such as losses, transmission constraints, and rampage rates, and also within the generators' capacity constraints and minimum start up and minimum or/and maximum down time constraints. Up to now the main technique use...

show abstract

Equilibrium prices supported by dual price functions in markets with non-convexities

Cited by 65 publications

References 10 publications

Electricity market clearing with improved scheduling of stochastic production

Electricity market clearing with improved scheduling of stochastic production

Bilevel programming for price-based electricity auctions: a revenue-constrained case

Alternative pricing approach for the lumpy electricity markets

Contact Info

Product

Resources

About