Pricing in non-convex electricity markets with flexible trade-off of pricing properties

Yi Wang, Zhifang Yang, Juan Yu and Sixu Liu

Energy, 2023, vol. 274, issue C

Abstract: For the pricing in the non-convex electricity markets, the various pricing properties including supporting a competitive equilibrium, non-discrimination, cost recovery of participants, and revenue adequacy of the market operator can hardly be simultaneously fulfilled. Current pricing methods cannot balance these properties because there lacks a computationally tractable pricing model that explicitly formulates these properties as objective functions or constraints. In this paper, we propose a pricing optimization model taking prices as decision variables and taking important pricing properties as objective functions or constraints. Based on duality theory, the Karush-Kuhn-Tucker conditions of the self-dispatch problem processed by convex relaxation are extended to construct the constraints related to supporting a competitive equilibrium. Taking advantage of the modeling flexibility, the constraints for non-discrimination, cost recovery, and revenue adequacy are established. The delicately designed pricing optimization model is a linear programming problem with an acceptable computational burden. It applies to the market clearing problem with non-convexity, time-coupling and network transmission characteristics. To be specific, the application of the proposed pricing method for the unit commitment problem is provided. The reasonability, scalability, and tractability of the proposed approach are illustrated in systems with over 2000 buses. Numerical experiments show that the proposed method shows better performance compared with other representative pricing methods.

Keywords: Competitive equilibrium; Market clearing; Convex hull price; Locational marginal price; Non-convex market (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0360544223007764
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:274:y:2023:i:c:s0360544223007764

DOI: 10.1016/j.energy.2023.127382

Access Statistics for this article

Energy is currently edited by Henrik Lund and Mark J. Kaiser

More articles in Energy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().