Proposed Market Mechanism Research Articles

Joint energy-frequency regulation electricity market design for the transition towards a renewable-rich power system

Striving to develop renewable energy generation (REG) has become a global trend. Due to high carbon emissions, fossil-fueled generation units (FFGUs) in an electrical energy market such as the day-ahead and real-time electricity markets are facing unprecedented constraints. From the perspective of FFGUs, an effective way is to change their market roles from energy suppliers with high environmental costs to secure and reliable frequency regulation service providers. To help FFGUs successfully complete the transition, a bi-level optimization model for the joint energy and regulation service market is proposed in this paper. Different from existing joint markets, both the environmental cost of FFGUs and the frequency regulation service (FRS) cost of REG units are considered in this research for market operators to determine the scheduling priorities of submitted bids from generation units. In the frequency regulation service market model, a dynamic approach to determining the FRS demand is applied, which not only incentivizes REG units to initiatively manage their outputs, but also derives the price signals through the equilibrium of the FRS demand and supply to ensure the revenue of FFGUs in the FRS market. Meanwhile, the decision-making model of the FFGUs under the proposed market mechanism is also presented. Finally, extensive numerical experiments demonstrate the feasibility and efficiency of the mechanism. Simulation results show that the proposed mechanism can stimulate a smooth transition of FFGUs by adapting to actual situations and policy changes.

A market mechanism for multiple air traffic resources

We introduce a model that extends the concept of air traffic flow management slot to the concept of time window, allowing to effectively deal with a network of interacting regulations. The model aims at minimising the total cost of delay of a time window allocation to flights and is based on an integer programming problem. It consists in a market-based mechanism between flights and a central authority to trade time windows, which fulfils the properties of individual rationality (every participating airline has a non-negative profit from the mechanism) and weak budget-balance (the mechanism requires no external subsidisation). Equity is assumed to be respected because the First Planned First Served allocation is an endowment guaranteed to all flights and allocated for free. The proposed market mechanism can be implemented in a distributed manner preventing the disclosure of confidential information by airlines, and is based on the Lagrangian relaxation of the integer optimisation problem, solved through the subgradient algorithm. We present some computational experiments conducted to test the model on some real instances of air traffic data.

Study on the electricity spot market trading mechanism considering the proportion of renewable energy consumption quota

The challenge of harmonizing the integration of renewable energy in market-driven transactions and assured accommodations presents a predicament in the development of China's electricity spot market. Moreover, as renewable energy penetration escalates, the issue of reserve undeliverability due to transmission congestion diminishes the power system's capacity to utilize renewable energy resources. To address this concern, this study introduces a secondary clearing mechanism for the electricity spot market, taking into account the proportion of renewable energy consumption quotas. Based on the first clearing, when renewable curtailment occurs, the bid pricing of abandoned power units undergoes flexible adjustment through the optimization of the price correction coefficient, followed by the execution of a secondary clearing utilizing the revised bidding information to fulfill the stipulations of the renewable energy consumption quota ratio. Drawing on the outcomes of the two-stage clearing, an incentive-compatible settlement compensation mechanism is proposed to preserve the impartiality of the market operator. The spot market clearing model accounts for the transmission safety margin, effectively mitigating the likelihood of transmission congestion, reserve inaccessibility, and renewable energy curtailment issues in real-time dispatching. Finally, a modified IEEE 30-bus system serves to substantiate the efficacy of the proposed market mechanism.

Nash Mechanisms for Market Design Based on Distribution Locational Marginal Prices

Being important information of both network conditions and energy trading, distribution locational marginal prices (DLMPs) are greatly useful for distribution network (DN) management. The goal of this paper is to develop a market mechanism that motivates price-making agents to trade active and reactive power at DLMPs. According to the optimal power flow problem based on second-order cone (SOC) relaxation, we first design the market rules that allow agents to strategically submit proposals of price and power generation/consumption. The market rules induce a noncooperative game between the DN operator and distributed generators. We prove that DLMP pricing can be implemented at any generalized Nash equilibrium (GNE) of the game. We also show that economic properties of strong budget balance, individual rationality, and system cost minimization can be achieved at any GNE. A decentralized algorithm is developed to reach a GNE of the game. Further, based on the convex-concave procedure, an extension of the market mechanism is proposed to cope with the situations that SOC relaxation is inexact. In simulation, the proposed market mechanism is compared with other game-theoretic models, and the economic properties are verified.

An interactive two-stage retail electricity market for microgrids with peer-to-peer flexibility trading

To accommodate the proliferation of microgrids (MGs) that manage various distributed energy resources (DERs) to ensure secure internal operations, an interactive two-stage retail electricity market based on the transactive energy is proposed to provide an effective platform for these prosumers to participate in distribution-side retail transactions. Firstly, given the unpredictability of uncertainty, the centralized day-ahead stochastic energy trading between the distribution system operator (DSO) and MGs is performed, where the chance-constrained uncertainty distribution locational marginal price (CC-UDLMP) that quantifies the cost of uncertainty precautions is used to settle the transactions. Secondly, in the intra-day stage, to eliminate power imbalances from rolling estimates by exploiting the adjustability capacity of the DERs within the MGs, the peer-to-peer (P2P) based flexibility service sharing is implemented between MGs under the system-level regulation of DSO. Thirdly, a fully distributed iterative algorithm is adopted to find the Nash equilibrium solution of this two-stage sequential game under the market machanism, where the Lp-box alternating direction methods of multipliers algorithm (Lp-box ADMM) is adopted to efficiently resolve the stochastic market clearing with a mixed-integer programming structure to improve the versatility of this work. It is verified that the proposed market mechanism can effectively leverage the flexibility potentials of the MGs and improve the overall market efficiency under uncertain environments.

Guest Editorial: Enhancing hosting capability for renewable energy generation in active distribution networks

Guest Editorial: Enhancing hosting capability for renewable energy generation in active distribution networks

Spot electricity market design for a power system characterized by high penetration of renewable energy generation

AbstractThe continuous growth of renewable generation in power systems brings serious challenges to electricity markets due to their characteristics different from conventional generation technologies. These challenges come from two dimensions, including short‐term (energy and ancillary service markets) and long‐term (long‐term bilateral and capacity markets) aspects. Under this background, the design of energy and ancillary service markets is studied for power systems with a high penetration level of variable renewable generation. In the proposed spot market mechanism, energy and frequency regulation service (FRS) bids are jointly cleared, where renewable generators are motivated to proactively manage the intermittency and uncertainty of their power outputs. The proposed market mechanism can also ensure the adequacy of FRS capacity for compensating variability of renewables. Besides, in order to ensure the execution of spot market clearing outcomes, this paper established a penalty scheme for mitigating the real‐time fluctuations of renewable generation outputs in the spot market. Differences between real‐time generation outputs and market clearing outcomes are managed within a certain limit by imposing the designed penalty prices on deviations. Finally, the feasibility and efficiency of the developed market mechanism and algorithms are manifested in the case studies.

Bidding in local electricity markets with cascading wholesale market integration

Local electricity markets are a promising idea to foster the efficiency and use of renewable energy at the distribution level. However, as such a new concept, how these local markets will be designed and integrated into existing market structures, and make the most profit from them, is still unclear. In this work, we propose a local market mechanism in which end-users (consumers, small producers, and prosumers) trade energy between peers. Due to possible low liquidity in the local market, the mechanism assumes that end-users fulfill their energy demands through bilateral contracts with an aggregator/retailer with access to the wholesale market. The allowed bids and offers in the local market are bounded by a feed-in tariff and an aggregator tariff guaranteeing that end-users get, at most, the expected cost without considering this market. The problem is modeled as a multi-leader single-follower bi-level optimization problem, in which the upper levels define the maximization of agent profits. In contrast, the lower level maximizes the energy traded in the local market. Due to the complexity of the matter, and lack of perfect information of end-users, we advocate the use of evolutionary computation, a branch of artificial intelligence that has been successfully applied to a wide variety of optimization problems. Throughout three different case studies considering end-users with distinct characteristics, we evaluated the performance of four different algorithms and assessed the benefits that local markets can bring to market participants. Results show that the proposed market mechanism provides overall costs improvements to market players of around 30–40% regarding a baseline where no local market is considered. However, the shift to local markets in energy procurement can affect the conventional retailer/aggregator role. Therefore, innovative business models should be devised for the successful implementation of local markets in the future.

Capacity market mechanism design considering network optimization and energy transition

The coordination of energy transition, fixed cost recovery, and the sufficient generation supply leads to a new challenge on the traditional capacity market mechanism. Moreover, in order to better match the network expansion, it is crucial to redesign the capacity market mechanism considering system topology at the same time. In this paper, a novel capacity market mechanism is proposed considering spot market operation, network expansion, and energy transition, which can minimize the total cost of capacity investment, network expansion, and generation operation while satisfying the energy transition constraints and topology circumstances. Specifically, the capacity market mechanism coordinated with spot market operation is illustrated, in which the energy transition and network constraints are embedded. Then, a bi-level optimization model is established where the trade organizers minimize the total cost of both investment and operation with subject to the spot power market in minimizing the local dispatching costs simultaneously. The numerical results of a test system show that more economical capacity portfolios can be obtained by constructing reasonable transmission lines, thereby obtaining a more optimal market cost. A detailed multi-scenario simulation is further analyzed to verify the effectiveness of the proposed market mechanism.

Game Theoretical Approach to Novel Reactive Power Ancillary Service Market Mechanism

In deregulated power systems, reactive power ancillary service through electricity market is becoming relevant where private generation companies participate in maintaining system wide bus voltage within the permissible limits. Marginal cost price (MCP) based real time reactive power ancillary service market faces several challenges due to the localized nature of reactive power. In this paper, a market mechanism for real time reactive power ancillary service market based on Stackelberg game model is proposed considering voltage-apparent power coupled subsystems. In the proposed Stackelberg game model, Independent System Operator (ISO) is considered as the leader, and GENCOs as followers. In the formulation, each GENCO is associated with a relevance factor in the partitioned subsystem so as to consider the real time voltage support requirement in the system. The market is then formulated as Mathematical Program with Equilibrium Constraints problem (MPEC). Existence of equilibrium, incentive compatibility, and individual rationality of the proposed market mechanism is then analysed in this work. The numerical examples are illustrated in PJM 5-bus system, and tested on IEEE 30- bus system, and Nordic 32 Bus-system. The mechanism induces truth-telling behavior of GENCOs, yields a non-negative profit, and the system wide bus voltage is improved.

A novel energy-reliability market framework for participation of microgrids in transactive energy system

This paper proposes a novel framework for a distribution level transactive energy system in order to facilitate energy transaction among microgrids while improving efficiency and reliability of distribution system. The proposed market mechanism simultaneously considers competition among participants, distribution network reliability and operation conditions. To improve the reliability of supply, a reputation system is proposed, which ranks energy suppliers according to a reputation index based on their long term energy transaction history. A demand-oriented approach is utilized for extracting local energy prices. The local energy pricing scheme is based on combination of reputation scores, loss reduction indices and demand-side offering prices. A secondary market is proposed to use the capacity of energy suppliers for reliability support service in distribution network. The local pricing scheme for the reliability market is based on outage scenarios and customer interruption penalties. It is shown that the proposed model enforces energy suppliers to honor their generation commitments and prevents them from greedy behavior in the market. The energy market mechanism improves the reliability of supply and intensifies competition among participants. This mechanism directly reduces active power losses in distribution network and indirectly improves nodal voltage and branch loading profile. Moreover, utilizing the capacity of microgrids in improving the reliability of network, postpones network reinforcement investments needed for keeping the service continuity indices in acceptable range.

An improved market mechanism for energy storage based on flexible state of energy

In this paper, a new operation mode is proposed for energy storage, based on which an improved semi-centralized mechanism is proposed for energy storage to participate in the day-ahead energy market. The new operation mode, namely the flexible state-of-energy (SOE) mode, is proposed based on the previous fixed SOE mode, under which the final SOE of energy storage at the end of the last period of the scheduling horizon is no more limited to a predefined value. Accordingly, the value-of-SOE curve is introduced to quantify the deviation cost of the final SOE from the predefined value. Under the proposed market mechanism, energy storage submits to the system operator the unit charging and discharging cost and the value-of-SOE curve. The system operator dispatches the charging and discharging power of energy storage according to the data submitted and system operation. A comparative analysis is conducted in the case studies, and results demonstrate that the proposed mechanism is efficient in further realizing the flexibility potential of energy storage and reducing the total cost of power system.

Design and game-Theoretic analysis of community-Based market mechanisms in heat and electricity systems

In an increasingly decentralized energy system with tight interdependencies with heat and electricity markets, prosumers, who act both as consumers and producers at the interface between the markets, are becoming important operational flexibility providers. Policy-makers and market operators need a better understanding of the motivations and behavior of prosumers in order to harness their underlying flexibility. In that context, existing market mechanisms must be accompanied by decision-making tools which enable direct participation of prosumers and cooperation among them towards a social choice. This work focuses on designing a community-based market mechanism, in which prosumers can pool their heat and electricity production and consumption, and coordinate their participation in heat and electricity wholesale markets. A central research question that is addressed, is to understand how this mechanism can affect the outcomes of the interactions among individuals towards a social choice, and in particular incentivize cooperation among prosumers. Game-theoretic concepts are used to analyze the properties of the proposed market mechanism with different allocation schemes, namely uniform pricing, Vickrey-Clarke-Groves, Shapley value, and nucleolus. This analysis shows that it is beneficial for the community as a whole to cooperate and that there exists a set of stable allocations for the proposed mechanism. Additionally, although no allocation can satisfy all fundamental desirable market properties, this study demonstrates that the proposed mechanism based on a nucleolus allocation can provide an interesting trade-off between stability, efficiency, and incentive compatibility. Finally, the concepts and properties discussed in this work are illustrated in a case study.

A Distribution Market Clearing Mechanism for Renewable Generation Units With Zero Marginal Costs

A key feature of an electricity distribution market is that it may be dominated by renewable generation with zero marginal cost. Existing market mechanisms are likely to fail in this context since it cannot generate a reasonable price signal to compensate for the investment cost of renewable generators. Given this background, a double-sided auction market mechanism is presented for pricing the zero marginal cost renewable generation in the distribution system. Honesty is proved to be a dominant strategy for participants, which would enable the proposed mechanism to develop into a set-and-forget bidding market. The proposed market mechanism is also shown to be compatible with the nodal pricing system. Finally, case studies are carried out, and the results show that under the proposed market mechanism, the problem of always bidding a zero price by renewable generators in some existing markets can be avoided. Even when only renewable generation units with zero marginal costs participate in the bidding, the proposed mechanism can still produce a reasonable market clearing price. When adopting the average pricing market mechanism, merits of nodal pricing can still be retained and contribute to the enhancement of the operating efficiency of the distribution network.

Research on the Income Mechanism and Investment Strategy of Additional Heat Source in Combined Heat and Power System

Utilization of additional heat sources (AHS), such as electric boilers and heat storage tanks, is an effective way to promote the wind power consumption in large scale combined heat and power system (CHPS) in northern China. To promote the construction and operation of the AHS, this paper proposed a market mechanism that thermal power plant and wind farm share the benefits and investment risks of AHS together. A novel market mechanism of AHS including income mechanism and investment strategy is proposed. Under this market mechanism, the following aspects are studied: (1) The cost and income model of each subject is derived; (2) The feasible region of invest and income proportion of each participant is analysed; (3) The optimal investment strategy of multi participates is built. At last, actual example simulations is conducted to demonstrate the effectiveness of the proposed market mechanism. Simulation results show that the proposed method can arouse the enthusiasm of wind farm and thermal power plant and promote the construction and operation of the AHS, which has a certain significance to promote wind power consumption in combined heat and power system.

Energy Trading with Electric Vehicles in Smart Campus Parking Lots

Energy trading with electric vehicles provides opportunities to eliminate the high peak demand for electric vehicle charging while providing cost saving and profits for all participants. This work aims to design a framework for local energy trading with electric vehicles in smart parking lots where electric vehicles are able to exchange energy through buying and selling prices. The proposed architecture consists of four layers: the parking energy layer, data acquisition layer, communication network layer, and market layer. Electric vehicles are classified into three different types: seller electric vehicles (SEVs) with an excess of energy in the battery, buyer electric vehicles (BEVs) with lack of energy in the battery, and idle electric vehicles (IEVs). The parking lot control center (PLCC) plays a major role in collecting all available offer/demand information among parked electric vehicles. We propose a market mechanism based on the Knapsack Algorithm (KPA) to maximize the PLCC profit. Two cases are considered: electric vehicles as energy sellers and the PLCC as an energy buyer, and electric vehicles as energy buyers and the PLCC as an energy seller. A realistic parking pattern of a parking lot on a university campus is considered as a case study. Different scenarios are investigated with respect to the number of electric vehicles and amount of energy trading. The proposed market mechanism outperforms the conventional scheme in view of costs and profits.

A smart market for nutrient credit trading to incentivize wetland construction

Nutrient trading and constructed wetlands are widely discussed solutions to reduce nutrient pollution. Nutrient markets usually include agricultural nonpoint sources and municipal and industrial point sources, but these markets rarely include investors who construct wetlands to sell nutrient reduction credits. We propose a new market design for trading nutrient credits, with both point source and non-point source traders, explicitly incorporating the option of landowners to build nutrient removal wetlands. The proposed trading program is designed as a smart market with centralized clearing, done with an optimization. The market design addresses the varying impacts of runoff over space and time, and the lumpiness of wetland investments.We simulated the market for the Big Bureau Creek watershed in north-central Illinois. We found that the proposed smart market would incentivize wetland construction by assuring reasonable payments for the ecosystem services provided. The proposed market mechanism selects wetland locations strategically taking into account both the cost and nutrient removal efficiencies. The centralized market produces locational prices that would incentivize farmers to reduce nutrients, which is voluntary. As we illustrate, wetland builders’ participation in nutrient trading would enable the point sources and environmental organizations to buy low cost nutrient credits.

Promotion Mechanism Selection of Circular Economy of Different Regions in China

Because of China's various regions in geographic location, population, resource endowment, economic and technical conditions are different. Therefore, in the practice process, we should suit one's measures to local conditions to choose promotion mechanism of regional circular economy development by considering factors of regional resources and economic development level. This paper summarizes the type of mechanism to promote circular economy, based on the analysis characteristics of resources and the environment, social development, and circulating levels of economic development of eastern, central and western regions, proposed market mechanism will be more conductive to the advance of the future development of circular economy of the eastern region, government guidance, enterprise practice, public participation mechanism for promoting cooperative development model more in line with the circular economy development stage of the central region, and promoting mechanism dominated by the government will effectively promote the development of circular economy in the western region. At the same time, this paper proposed specific implementation path of all promoting mechanism.

Closed loop price signal based market operation within Microgrids

AbstractWithin a general Microgrid framework, this paper presents a model to simulate closed loop energy and ancillary services markets operated by a Microgrid Central Controller (MGCC) and to investigate the performance of such a market mechanism in managing disturbances both within and outside the Microgrid cell. The proposed approach can be seen as an alternative to a more traditional control approach in which the central operator optimises the dispatch of all generators taking into account their bids and then instructing them to produce their outputs at the specified prices according to merit order and network constraints. In the alternative approach discussed here, this dispatch decision is decentralised to each controllable unit. The central operator only influences the decision taken by each unit via price signals. The main advantage of the approach is to preserve the independency of the local controllers and to decentralise the operation decision, making the system more able to cope with a large number of generating units. The performance of the proposed market mechanism is examined via different case studies that simulate the control actions of MGCC, micro‐sources and controllable loads in managing small and large disturbances within and outside the Microgrid cell. Copyright © 2010 John Wiley & Sons, Ltd.

A Market-Based Optimization Algorithm for Distributed Systems

In this paper, a market-based decomposition method for decomposable linear systems is developed. The solution process iterates between a master problem that solves the market-matching problem, and subproblems that solve the agents’ bundle-determination problems. Starting from any initial price and feasible allocation, system optimality can be achieved under a dynamic market-trading algorithm in a finite number of trades. The final market-clearing prices are discovered by this market trading and an efficient allocation is achieved by direct, wealth-improving resource exchanges among self-interested agents. Certain types of strategic behavior by the agents and a dealer in the marketplace are studied as well. Our proposed market mechanism addresses price dynamics, incentive issues, and economic transactions of real-world, distributed decision-making situations more realistically than traditional decomposition approaches. In addition, it can be operated in both synchronous and asynchronous environments. We provide a market-based paradigm for decentralized problem solving and information processing that can be easily implemented to support real-time optimization of distributed systems.