Incentive-Compatible Market Clearing for a Two-Stage Integrated Electricity-Gas-Heat Market

Abstract

The establishment and development of an integrated energy market (IEM) contributes to the equitable distribution of electrical and thermal energy production resources. However, the application of conventional locational marginal price theory generally fails to promote the declaration of truthful marginal costs by market participants in the process of clearing and settlement of the IEM, which detracts from market fairness and may reduce market efficiency. Simultaneously, the continuous expansion in the scale of renewable energy sources (RESs) threatens the safe and stable operation of electrical power systems. Accordingly, the present study seeks to improve the efficiency of the IEM under large-scale RES penetration, and promote the truthful declarations of market participants by applying a Vickrey-Clarke-Groves (VCG) auction scheme to the IEM, and establishes a two-stage IEM model that promotes compatibility between the incentives of market participants to enhance market fairness. The present study also addresses the imbalance between market revenue and expenditure typically produced by the VCG auction scheme by designing an ex-post payment redistribution mechanism to ensure the equitable cost recovery of all market participants. Simulation results demonstrate that the application of the proposed VCG auction system to the IEM ensures maximum efficiency, cost recovery, and incentive compatibility as dominant strategies, and helps to integrate large-scale RES penetration with the IEM.