Simultaneous Optimal Auction and Unit Commitment for Deregulated Electricity Markets

Yan, J.H.; Stern, Gary A.

doi:10.1016/s1040-6190(02)00380-9

Cited by 26 publications

(17 citation statements)

References 13 publications

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“…This approach is also consistent with the pay-at-MCP mechanism [5] because minimized costs will be the same as settlement costs. However, if this auction mechanism were adopted, suppliers may bid differently, and there is no guarantee that the expected savings will be realized.…”

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confidence: 53%

“…The problem as presented in [5] is with (6) This minimization is subject to (2)-(4). Here is not equivalent to the marginal cost but is defined per (5).…”

Section: B Payment Cost Minimization Problemmentioning

confidence: 99%

“…This approach is good or at least consistent for a market that uses the pay-asoffer mechanism for market settlements. However, since most ISOs in the United States use the pay-at-MCP mechanism for settlement, the auction and settlement mechanisms are inconsistent [5] since the payment costs are usually significantly higher than the minimized auction costs for a given set of offers. Proponents of offer cost minimization indicate that if offer prices represent true production costs, then this mechanism maximizes social welfare [8], [12], [13].…”

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confidence: 99%

“…An alternate mechanism is the payment cost minimization auction [5]- [11], which directly minimizes the payment costs of consumers. Examples in the literature have shown that for a given set of offers, if this auction mechanism is used, then the payment costs can be significantly reduced as compared to what 1 While markets are moving toward the locational marginal pricing (LMP) of energy where the transmission network is considered, we shall for simplicity consider uniform MCP of the day-ahead energy market.…”

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confidence: 99%

“…While methods for minimizing offer costs abound, limited approaches have been reported for payment cost minimization. Most of the papers on payment cost minimization mathematically formulate the problem and use illustrative examples to demonstrate that it can reduce procurement costs but present no solution methodology [5], [7], [8], [11]. The only paper that presented a solution methodology was based on forward dynamic programming [10], but the author acknowledges that the method is not suited for large-scale problems because of the curse of dimensionality.…”

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confidence: 99%

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Payment Cost Minimization Auction for Deregulated Electricity Markets Using Surrogate Optimization

Luh

Blankson

Chen

et al. 2006

IEEE Trans. Power Syst.

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Abstract-Deregulated electricity markets use an auction mechanism to select offers and their power levels for energy and ancillary services. A settlement mechanism is then used to determine the payments resulting from the selected offers. Currently, most independent system operators (ISOs) in the United States use an auction mechanism that minimizes the total offer costs but determine payment costs using a settlement mechanism that pays uniform market clearing prices (MCPs) to all selected offers. Under this setup, the auction and settlement mechanisms are inconsistent since minimized costs are different from payment costs. Illustrative examples in the literature have shown that for a given set of offers, if an auction mechanism that directly minimizes the payment costs is used, then payment costs can be significantly reduced as compared to minimizing offer costs. This observation has led to discussions among stakeholders and policymakers in the electricity markets as to which of the two auction mechanisms is more appropriate for ISOs to use. While methods for minimizing offer costs abound, limited approaches for minimization of payment costs have been reported. This paper presents an effective method for directly minimizing payment costs. In view of the specific features of the problem including the nonseparability of its objective function, the discontinuity of offer curves, and the maximum term in defining MCPs, our key idea is to use augmented Lagrangian relaxation and to form and solve offer and MCP subproblems by using the surrogate optimization framework. Numerical testing results demonstrate that the method is effective, and the resulting payment costs are significantly lower than what are obtained by minimizing the offer costs for a given set of offers.Index Terms-Augmented Lagrangian relaxation, deregulated electricity markets, market clearing price (MCP), offer cost minimization, payment cost minimization, surrogate optimization.

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mentioning

confidence: 53%

“…The problem as presented in [5] is with (6) This minimization is subject to (2)-(4). Here is not equivalent to the marginal cost but is defined per (5).…”

Section: B Payment Cost Minimization Problemmentioning

confidence: 99%