Strict linear prices in non-convex European day-ahead electricity markets

Abstract

The European power grid can be divided into several market areas where the price of electricity is determined in a day-ahead auction. Market participants can provide continuous hourly bid curves and combinatorial bids with associated quantities given the prices. The goal of our auction is to maximize the economic surplus of all participants subject to quantity constraints and price constraints. The price constraints ensure that no one incurs a loss. Only traders who submitted a combinatorial bid might miss a not-realized profit. The resulting problem is a large scale mathematical program with equilibrium constraints (MPEC) and binary variables that cannot be solved efficiently by standard solvers. We present an exact algorithm and a fast heuristic for this type of problem. Both algorithms decompose the MPEC into a master problem (a MIQP) and pricing subproblems (LPs). The modeling technique and the algorithms are applicable to a wide variety of combinatorial auctions that are based on mixed integer programs.

Organization and functioning of liberalized electricity markets: An overview of the Dutch market

“…EMCC passed on its duty to its successor NorthWestern Europe (NWE) price coupling system (including countries Denmark, Finland, Norway, Sweden, Great Britain, Belgium, France, Germany, Luxemburg and the Netherlands) in February 2014. Finally, PCR project combined NWE and South-Western Europe (SWE) regions by using EUPHEMIA (Pan-European Hybrid Electricity Market Integration Algorithm) in May 2014 [25,24,9].…”

Optimizing Day-Ahead Electricity Market Prices: Increasing the Total Surplus for Energy Exchange Istanbul

“…The startup costs of power plants and industrial electricity consumers create complementarities across consecutive operating hours and create motivation for bidders to place bids for a consecutive set of hours to avoid multiple setups (Wolfram 1998, Hortaçsu and Puller 2008, Reguant 2014. Hence, liberalized electricity markets allow some form of complementary bidding, and thus, combinatorial auctions are designed to determine electricity prices (Meeus et al 2009, Martin et al 2014, Derinkuyu 2015. Unlike the combinatorial auctions discussed previously, in which the winner receives its bid price, in electricity markets, a single MCP is used to pay market participants.…”

Industrial Engineering Applications in Emerging Countries

“…The authors also ex plore the impact of block orders on the complex ity of the problem and report how the solution time changes with the density of block orders. Martin et al (2014 ) ex tend Meeus et al (2009) by (1) allowing for interpolation of price and quantity bids and (2) considering mul tiple pricing regions with transmission capacity limits among them. This leads to a more complex MINLP formulation for the day-ahead price optimization.…”

“…Derinkuyu (2014a) introduces an innovative approach to the prob lem by minimizing prices while representing social welfare in the constraint set. His approach also results in an MIP, which is consid erably simpler than Martin et al (2014). Derinkuyu (2014a) showed that problem size reduction techniques can be effective.…”