Supply function equilibrium in power markets: Mesh networks

Yuanzhang Xiao, Chaithanya Bandi, Ermin Wei

Research output: Chapter in Book/Report/Conference proceedingConference contribution

1 Scopus citations

Abstract

We study decentralized power markets with strategic power generators. In decentralized markets, each generator submits its supply function (i.e., the amount of electricity it is willing to produce at various unit prices) to the independent system operator (ISO), who takes the submitted supply functions as the true marginal cost functions, and dispatches the generators to clear the market. If all generators reported their true marginal cost functions, the market outcome would be efficient (i.e., the total generation cost is minimized). However, when generators are strategic and aim to maximize their own profits, the reported supply functions are not necessarily the marginal cost functions, and the resulting market outcome may be inefficient. The efficiency loss depends on the topology of the underlying transmission network, because the topology sets constraints on the feasible power supply from generators. This paper provides an analytical upper bound of the efficiency loss due to strategic generators. Our upper bound sheds light on how the efficiency loss depends on the (mesh) transmission network topology (e.g., the degrees of buses, the admittances and flow limits of transmission lines).

Original languageEnglish (US)
Title of host publication2016 IEEE Global Conference on Signal and Information Processing, GlobalSIP 2016 - Proceedings
PublisherInstitute of Electrical and Electronics Engineers Inc.
Pages861-865
Number of pages5
ISBN (Electronic)9781509045457
DOIs
StatePublished - Apr 19 2017
Event2016 IEEE Global Conference on Signal and Information Processing, GlobalSIP 2016 - Washington, United States
Duration: Dec 7 2016Dec 9 2016

Publication series

Name2016 IEEE Global Conference on Signal and Information Processing, GlobalSIP 2016 - Proceedings

Other

Other2016 IEEE Global Conference on Signal and Information Processing, GlobalSIP 2016
CountryUnited States
CityWashington
Period12/7/1612/9/16

Keywords

  • Power markets
  • Price of anarchy
  • Supply function bidding

ASJC Scopus subject areas

  • Signal Processing
  • Computer Networks and Communications

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