TY - GEN

T1 - Supply function equilibrium in power markets

T2 - 2016 IEEE Global Conference on Signal and Information Processing, GlobalSIP 2016

AU - Xiao, Yuanzhang

AU - Bandi, Chaithanya

AU - Wei, Ermin

PY - 2017/4/19

Y1 - 2017/4/19

N2 - 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).

AB - 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).

KW - Power markets

KW - Price of anarchy

KW - Supply function bidding

UR - http://www.scopus.com/inward/record.url?scp=85019257190&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85019257190&partnerID=8YFLogxK

U2 - 10.1109/GlobalSIP.2016.7905965

DO - 10.1109/GlobalSIP.2016.7905965

M3 - Conference contribution

AN - SCOPUS:85019257190

T3 - 2016 IEEE Global Conference on Signal and Information Processing, GlobalSIP 2016 - Proceedings

SP - 861

EP - 865

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

PB - Institute of Electrical and Electronics Engineers Inc.

Y2 - 7 December 2016 through 9 December 2016

ER -