Supervision mechanism of virtual bidding in electricity market: a review

Abstract

In the reform of China‘s electricity market, most provinces adopt the centralized mode based on nodal pricing, thus the price convergence problem between day-ahead market and real-time market needs to be promoted. As a common practice in America, virtual bidding mechanism can promote price convergence, control market power and improve market efficiency. However, due to the financial nature of virtual bidding, virtual bidders may disrupt the market and obtain improper profits, thus damaging market efficiency and the interests of other participants. This paper summarizes the key characteristics of virtual bidding mechanisms in America, and analyzes the potential problems that by introducing virtual bidding into China. Then this paper summarizes the pre and post regulatory measures as well as credit mechanisms of virtual bidding in different electricity markets. In view of the cross-product manipulation through virtual bidding, this paper analyzes its principle and summarizes the regulation methods. Finally, considering the specific situation of China’s electricity market reform, this paper puts forward regulatory suggestions on implementing the virtual bidding mechanism in China.