Electricity Markets: Designing Auctions Where Suppliers Have Uncertain Costs

Abstract

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Meeting peak electricity demand through combinatorial reverse auctioning of renewable energy

“…The electrical sectors in many countries are currently undergoing reformations, particularly in the form of deregulation of the markets and privatization of power retailers [1,2]. Furthermore, there has been a substantial increase in the number of online electricity auctions over the last decade due to their ability to improve allocative efficiency and to foster competition among power suppliers [1,3,4].…”

“…It has also been shown that the entry of new energy sources into the markets is a catalyst for economic growth [3]. Numerous governments have adopted renewable energy auctions, and their number has increased from 9% in 2009 to 44% by the beginning of 2013 [2]. A common type of electricity auctions is for awarding contracts for the construction of new renewable energy facilities [1].…”

“…The target of all these auctions is to attract new investors (small and large) [5]. Existing electricity auctions are mostly oriented towards awarding long-term contracts, typically with one or two suppliers over many months or years [2,5,9], with very few focusing on short-term contracts (few hours) [1,10]. Nonetheless, most of the literature on electricity markets does not disclose and describe the auction design and features, bidding strategies and winnerdetermination methods.…”

“…Moreover, according to one of the agencies, integrating wholesale balance electricity auction markets can save hundred million dollars per year. In [2], the authors are interested in auction design, information structure and bidding behavior that influence the market outcome when bidders do not fully know about their competitor costs. They examined the market circumstances and addressed the market efficiency that is enhanced when the number of steps of bid-schedules is restricted.…”

Market Power and Welfare in Asymmetric Divisible Good Auctions

“…6 European Commission (2007) has asserted that "at the wholesale level, gas and electricity markets remain 2 on fuel technologies, which have steep marginal costs. Holmberg and Wolak (2015) argue that, in wholesale electricity markets, information on suppliers'production costs is asymmetric. For evidence on the e¤ect of cost heterogeneity on bidding in wholesale electricity markets, see Crawford et al (2007) and Bustos-Salvagno (2015).…”