A stochastic electricity market clearing formulation with consistent pricing properties

Zavala, Victor M.; Kim, Kibaek; Anitescu, Mihai; Birge, John

doi:10.1287/opre.2016.1576

Title: A stochastic electricity market clearing formulation with consistent pricing properties

Journal Article · Thu Mar 16 00:00:00 EDT 2017 · Operations Research

DOI:https://doi.org/10.1287/opre.2016.1576· OSTI ID:1364657

Zavala, Victor M. ^[1]; Kim, Kibaek ^[2]; Anitescu, Mihai ^[2]; Birge, John ^[3]

Univ. of Wisconsin, Madison, WI (United States)
Argonne National Lab. (ANL), Lemont, IL (United States)
Univ. of Chicago, Chicago, IL (United States)

We argue that deterministic market clearing formulations introduce arbitrary distortions between day-ahead and expected real-time prices that bias economic incentives. We extend and analyze a previously proposed stochastic clearing formulation in which the social surplus function induces penalties between day-ahead and real-time quantities. We prove that the formulation yields price bounded price distortions, and we show that adding a similar penalty term to transmission flows and phase angles ensures boundedness throughout the network. We prove that when the price distortions are zero, day-ahead quantities equal a quantile of their real-time counterparts. The undesired effects of price distortions suggest that stochastic settings provide significant benefits over deterministic ones that go beyond social surplus improvements. Finally, we propose additional metrics to evaluate these benefits.

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Research Organization:: Argonne National Laboratory (ANL), Argonne, IL (United States)

Sponsoring Organization:: USDOE Office of Science (SC)

Grant/Contract Number:: AC02-06CH11357

OSTI ID:: 1364657

Journal Information:: Operations Research, Vol. 65, Issue 3; ISSN 0030-364X

Publisher:: InformsCopyright Statement

Country of Publication:: United States

Language:: English

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Cited by: 37 works

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Strategic offers in day‐ahead market co‐optimizing energy and reserve under high penetration of wind power production: An MPEC approach Tsimopoulos, Evangelos G.; Georgiadis, Michael C. AIChE Journal, Vol. 65, Issue 7 https://doi.org/10.1002/aic.16495	journal	November 2018
Pan-European CVaR-Constrained Stochastic Unit Commitment in Day-Ahead and Intraday Electricity Markets Nobis, Moritz; Schmitt, Carlo; Schemm, Ralf RWTH Aachen University https://doi.org/10.18154/rwth-2020-05187	text	January 2020
Optimal allocation of HVDC interconnections for exchange of energy and reserve capacity services Delikaraoglou, Stefanos; Pinson, Pierre Energy Systems, Vol. 10, Issue 3 https://doi.org/10.1007/s12667-018-0288-6	journal	April 2018
Pan-European CVaR-Constrained Stochastic Unit Commitment in Day-Ahead and Intraday Electricity Markets Nobis, Moritz; Schmitt, Carlo; Schemm, Ralf Energies, Vol. 13, Issue 9 https://doi.org/10.3390/en13092339	journal	May 2020

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29 ENERGY PLANNING, POLICY, AND ECONOMY
stochastic
electricity
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market clearing
pricing

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