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A Market Mechanism for a Two-stage Settlement Electricity Market with Energy Storage

Rajni Kant Bansal, Enrique Mallada, Patricia Hidalgo-Gonzalez

Abstract

Electricity markets typically clear in two stages: a day-ahead market and a real-time market. In this paper, we propose market mechanisms for a two-stage multi-interval electricity market with energy storage, generators, and demand uncertainties. We consider two possible mixed bidding strategies: storage first bids cycle depths in the day ahead and then charge-discharge power bids in the real-time market for any last-minute adjustments. While the first strategy only considers day-ahead decisions from an individual participant's perspective as part of their individual optimization formulation, the second strategy accounts for both the market operator's and participants' perspectives. We demonstrate that the competitive equilibrium exists uniquely for both mechanisms. However, accounting for the day-ahead decisions in the bidding function has several advantages. Numerical experiments using New York ISO data provide bounds on the proposed market mechanism.

A Market Mechanism for a Two-stage Settlement Electricity Market with Energy Storage

Abstract

Electricity markets typically clear in two stages: a day-ahead market and a real-time market. In this paper, we propose market mechanisms for a two-stage multi-interval electricity market with energy storage, generators, and demand uncertainties. We consider two possible mixed bidding strategies: storage first bids cycle depths in the day ahead and then charge-discharge power bids in the real-time market for any last-minute adjustments. While the first strategy only considers day-ahead decisions from an individual participant's perspective as part of their individual optimization formulation, the second strategy accounts for both the market operator's and participants' perspectives. We demonstrate that the competitive equilibrium exists uniquely for both mechanisms. However, accounting for the day-ahead decisions in the bidding function has several advantages. Numerical experiments using New York ISO data provide bounds on the proposed market mechanism.
Paper Structure (14 sections, 4 theorems, 54 equations, 3 figures)

This paper contains 14 sections, 4 theorems, 54 equations, 3 figures.

Table of Contents

  1. Introduction
  2. Market Model
  3. Model Preliminaries
  4. Social Planner
  5. Two-Stage Market Mechanism
  6. Day-Ahead Market
  7. Real-Time Market
  8. Market Equilibrium
  9. Uniform Price Market Mechanism
  10. Competitive Equilibrium in the Real-Time Market
  11. Mixed Market Mechanism - Day-Ahead Unaware Bidding
  12. Mixed Market Mechanism - Day-Ahead Aware Bidding
  13. Case Study
  14. Concluding Remarks

Key Result

Theorem 2

(Incentive Compatibility bansal2021market) The competitive equilibrium in the day-ahead market also aligns with the social optimum.

Figures (3)

  • Figure 1: Two-stage Mixed Market Mechanism.
  • Figure 2: Social cost in the proposed mixed market mechanism, social planner without periodicity constraints, and social planner with periodicity constraints w.r.t (left) storage capital cost and (right) storage capacity.
  • Figure 3: Storage profit in the proposed mixed market mechanism, social planner without periodicity constraints, and social planner with periodicity constraints w.r.t (left) storage capital cost and (right) storage capacity.

Theorems & Definitions (8)

  • Definition 1
  • Theorem 2
  • Theorem 3
  • proof
  • Theorem 4
  • proof
  • Theorem 5
  • proof