Although the specific structures of electricity markets are diverse around the world, they were all conceived on the premise of predictable, controllable generation with nonnegligible marginal costs. Recent changes, specifically, the increasing renewable integration, have challenged such assumptions. In light of this shift, this thesis intends to devise new frameworks and advance our understanding of the future markets. The first part focuses on mechanism design when the model fully reflects the physics of the grid and the participants. We consider a market that involves continuous goods, general nonconvex constraints, and second stage costs. We then design the payments and conditions under which coalitions cannot influence the outcome. Under the incentive-compatible VCG mechanism, we prove that coalition-proof outcomes are achieved if bids are convex and constraints are polymatroids. By relaxing incentive-compatibility, we investigate core-selecting mechanisms that are coalition-proof without conditions. We show that they generalize the economic rationale of the LMP mechanism, and can approximate truthfulness without the price-taking assumption. Finally, they are budget-balanced. The second part coordinates regional markets to exploit the geographic diversification of renewables. In Europe, reserves remain an exclusive responsibility of regional operators. This limited coordination and the sequential structure hinder the utilization of generation and transmission. To promote reserve exchange, a preemptive model can optimally withdraw inter-area transmission capacity from day-ahead energy for reserves. This bilevel program however does not suggest costs that guarantee coordination. We formulate a new preemptive model that allows us to obtain stable benefits immune to deviations. Our proposal, least-core benefits, achieves minimal stability violation with a tractable computation.
Motivated by the markets operating on fast time scales, we present a framework for online coalitional games with time-varying coalitional values and propose real-time payoff distribution mechanisms. Specifically, we design two online distributed algorithms to track the Shapley value and the core, the two most widely studied payoff distribution criteria in coalitional game theory. We show that the payoff distribution trajectory resulting from our proposed algorithms converges to a neighborhood of the time-varying solutions. We adopt an operator-theoretic perspective to show the convergence of o…
In this paper, we propose a bilateral peer-to-peer (P2P) energy trading scheme under single-contract and multi-contract market setups, both as an assignment game, and a special class of coalitional games. {The proposed market formulation allows for efficient computation of a market equilibrium while keeping the desired economic properties offered by the coalitional games. Furthermore, our market model allows buyers to have heterogeneous preferences (product differentiation) over the energy sellers, which can be economic, social, or environmental. To address the problem of scalability in coalit…
In this paper we propose two novel coalitional game theory based optimization methods for minimizing the cost of electricity consumed by households from a smart community. Some households in the community may own renewable energy systems (RESs) conjoined with energy storing systems (ESSs). Some other residences own ESSs only, while the remaining households are simple energy consumers. We first propose a coalitional cost optimization method in which RESs and ESSs owners exchange energy and share their renewable energy and storage spaces. We show that by participating in the proposed game these …
In this paper, we analyze Nash equilibria between electricity producers selling their production on an electricity market and buying CO2 emission allowances on an auction carbon market. The producers' strategies integrate the coupling of the two markets via the cost functions of the electricity production. We set out a clear Nash equilibrium on the power market that can be used to compute equilibrium prices on both markets as well as the related electricity produced and CO2 emissions released.
We consider a two-stage market mechanism for trading electricity including renewable generation as an alternative to the widely used multi-settlement market structure. The two-stage market structure allows for recourse decisions by the market operator, which are not possible in today's markets. We allow for different conventional generation cost curves in the forward and the real-time stages. We have considered costs of demand response programs and black outs, and adopt a DC power flow model to account for network constraints. Our first result is to show existence (by construction) of a sequen…
Tie-line scheduling in multi-area power systems in the US largely proceeds through a market-based mechanism called Coordinated Transaction Scheduling (CTS). We analyze this market mechanism through a game-theoretic lens. Our analysis characterizes the effect of market liquidity, market participants' forecasts about inter-area price spreads, transactions fees and coupling of CTS markets with up-to-congestion virtual transactions. Using real data, we empirically verify that CTS bidders can employ simple learning algorithms to discover Nash equilibria that support the conclusions drawn from equil…
Despite extensive research in the past five years and several successfully completed and on-going pilot projects, regulators are still reluctant to implement peer-to-peer trading at a large-scale in today's electricity market. The reason could partly be attributed to the perceived disadvantage of current market participants like retailers due to their exclusion from market participation - a fundamental property of decentralised peer-to-peer trading. As a consequence, recently, there has been growing pressure from energy service providers in favour of retailers' participation in peer-to-peer tr…
In the restructured electricity industry, electricity pooling markets are an oligopoly with strategic producers possessing private information (private production cost function). We focus on pooling markets where aggregate demand is represented by a non-strategic agent. Inelasticity of demand is a main difficulty in electricity markets which can potentially result in market failure and high prices. We consider demand to be inelastic. We propose a market mechanism that has the following features. (F1) It is individually rational. (F2) It is budget balanced. (F3) It is price efficient, that is, …
Aggregators are playing an increasingly crucial role in the integration of renewable generation in power systems. However, the intermittent nature of renewable generation makes market interactions of aggregators difficult to monitor and regulate, raising concerns about potential market manipulation by aggregators. In this paper, we study this issue by quantifying the profit an aggregator can obtain through strategic curtailment of generation in an electricity market. We show that, while the problem of maximizing the benefit from curtailment is hard in general, efficient algorithms exist when t…
Considering the sequential clearing of energy and reserves in Europe, enabling inter-area reserve exchange requires optimally allocating inter-area transmission capacities between these two markets. To achieve this, we provide a market-based allocation framework and derive payments with desirable properties. The proposed min-max least core selecting payments achieve individual rationality, budget balance, and approximate incentive compatibility and coalitional stability. The results extend the works on private discrete items to a network of continuous public choices.
Due to its theoretical virtues, several recent works propose the use of the incentive-compatible Vickrey-Clarke-Groves (VCG) mechanism for electricity markets. Coalitions of participants, however, can influence the VCG outcome to obtain higher collective profit. To address this issue, we propose core-selecting mechanisms for their coalition-proofness. We show that core-selecting mechanisms generalize the economic rationale of the locational marginal pricing (LMP) mechanism. Namely, these mechanisms are the exact class of mechanisms that ensure the existence of a competitive equilibrium in line…
Control reserves are power generation or consumption entities that ensure balance of supply and demand of electricity in real-time. In many countries, they are operated through a market mechanism in which entities provide bids. The system operator determines the accepted bids based on an optimization algorithm. We develop the Vickrey-Clarke-Groves (VCG) mechanism for these electricity markets. We show that all advantages of the VCG mechanism including incentive compatibility of the equilibria and efficiency of the outcome can be guaranteed in these markets. Furthermore, we derive conditions to…
Various peer-to-peer energy markets have emerged in recent years in an attempt to manage distributed energy resources in a more efficient way. One of the main challenges these models face is how to create and allocate incentives to participants. Cooperative game theory offers a methodology to financially reward prosumers based on their contributions made to the local energy coalition using the Shapley value, but its high computational complexity limits the size of the game. This paper explores a stratified sampling method proposed in existing literature for Shapley value estimation, and modifi…
In this paper, we study how datacenter energy cost can be effectively reduced in the wholesale electricity market via cooperative power procurement. Intuitively, by aggregating workloads and renewables across a group of datacenters, the overall power demand uncertainty of datacenters can be reduced, resulting in less chance of being penalized when participating in the wholesale electricity market. We use cooperative game theory to model the cooperative electricity procurement process of datacenters as a cooperative game, and show the cost saving benefits of aggregation. Then, a cost allocation…
Electricity markets differ in their ability to meet power imbalances in short notice in a controlled fashion. Relatively flexible markets have the ability to ramp up (or down) power flows across interties without compromising their ability to reliably meet internal demand. In this paper, a market mechanism to enable flexibility trading amongst market operators is introduced. In the proposed market mechanism, market operators exchange information regarding optimal terms of trade (nodal prices and flows) along interconnection lines at every trading round. Equipped with this information, each mar…
We consider the problem of optimal bidding for virtual trading in two-settlement electricity markets. A virtual trader aims to arbitrage on the differences between day-ahead and real-time market prices; both prices, however, are random and unknown to market participants. An online learning algorithm is proposed to maximize the cumulative payoff over a finite number of trading sessions by allocating the trader's budget among his bids for K options in each session. It is shown that the proposed algorithm converges, with an almost optimal convergence rate, to the global optimal corresponding to t…
