20th International Conference on the European Energy Market - EEM24, Istanbul (Turkey). 10-12 June 2024
Summary:
Even when a market is cleared using optimal power flow calculations, ensuring dispatch feasibility, the settlement can be performed in different ways. In this paper, we consider three different types of settlement mechanisms for an optimal dispatch, 1) nodal pricing for both generation and demand, 2) nodal price for generation and weighted average nodal price for demand, and 3) settlement of both generation and demand at the bid price of the most expensive cleared generator. The settlement rules affect the distribution of revenues and costs among agents as well as the scheduling of price-based or implicit demand responses. We analyze these effects under competitive conditions and in the presence of a strategic agent representing either a demand alone or a demand in conjunction with a generator. Our findings highlight nodal pricing as the most efficient approach for demand response scheduling in competitive marts, whereas average and marginal pricing can lead to suboptimal outcomes, especially with strategic agents.
Spanish layman's summary:
Este artículo considera tres tipos de mecanismos de liquidación de energía: 1) precios nodales para la generación y demanda, 2) precio nodal para la generación y precio nodal promedio ponderado para la demanda, y 3) liquidación al precio de oferta del generador compensado más caro. Los precios medios y marginales pueden conducir a resultados subóptimos, especialmente con los agentes estratégicos.
English layman's summary:
This paper considers three types of settlement mechanisms 1) nodal pricing for both generation and demand, 2) nodal price for generation and weighted average nodal price for demand, and 3) settlement at the bid price of the most expensive cleared generator. Average and marginal pricing can lead to suboptimal outcomes, especially with strategic agents.
Keywords: Electricity Markets, Power markets, Power Systems, Optimization, Strategic Gaming
DOI: 
https://doi.org/10.1109/EEM60825.2024.10608882
Published in IEEE EEM 2024, pp: 1-9, ISBN: 979-8-3503-8175-7
Publication date: 2024-08-08.
Citation:
S. Bindu, L. Olmos, J.P. Chaves, Strategic plays in electricity markets: exploring gaming opportunities for demand under different settlement rules, 20th International Conference on the European Energy Market - EEM24, Istanbul (Turkey). 10-12 June 2024. In: IEEE EEM 2024: Conference proceedings, ISBN: 979-8-3503-8175-7
