Main Challenges of Implementing Penalty Mechanisms in Transactive Electricity Markets

Abstract

Efficient operation of electricity markets necessitates a penalty mechanism to penalize market participants who do not fulfill their market obligations. However, the traditional penalty mechanisms that have been successfully implemented in wholesale electricity markets may result in unintended consequences in transactive markets where the participants have uncertain supply or demand. In this regard, this letter investigates main challenges of applying traditional penalty mechanisms in transactive energy markets. Some efficient strategies are also proposed to operate the transactive markets in such a way that guarantees its security as well as liquidity.