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Pricing in non-convex markets with quadratic deliverability costs

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  • Kuang, Xiaolong
  • Lamadrid, Alberto J.
  • Zuluaga, Luis F.

Abstract

This article studies the problem of obtaining equilibrium clearing prices for markets with non-convexities when it is relevant to account for convex quadratic deliverability costs and constraints. In a general market, such a situation arises when quadratic commodity or transactions costs are relevant. In the particular case of electricity markets, there is a mix of resources including dispatchable and renewable energy sources, leading to the presence of integer variables and quadratic costs reflecting ramping needs. To illustrate our results, we compute and analyze the equilibrium clearing prices of the Scarf's classical market problem with the addition of ramping costs.

Suggested Citation

  • Kuang, Xiaolong & Lamadrid, Alberto J. & Zuluaga, Luis F., 2019. "Pricing in non-convex markets with quadratic deliverability costs," Energy Economics, Elsevier, vol. 80(C), pages 123-131.
    • Handle: RePEc:eee:eneeco:v:80:y:2019:i:c:p:123-131
    DOI: 10.1016/j.eneco.2018.12.022
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    Cited by:

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    2. Hacopian Dolatabadi, Sarineh & Latify, Mohammad Amin & Karshenas, Hamidreza & Sharifi, Alimorad, 2022. "On pricing issues in electricity markets in the presence of externalities," Energy, Elsevier, vol. 246(C).
    3. Hung-po Chao, 2019. "Incentives for efficient pricing mechanism in markets with non-convexities," Journal of Regulatory Economics, Springer, vol. 56(1), pages 33-58, August.
    4. Xin Shi & Alberto J. Lamadrid L. & Luis F. Zuluaga, 2021. "Revenue Adequate Prices for Chance-Constrained Electricity Markets with Variable Renewable Energy Sources," Papers 2105.01233, arXiv.org.
    5. S. Wogrin & D. Tejada-Arango & S. Delikaraoglou & A. Lamadrid & A. Botterud, 2022. "The impact of convexity on expansion planning in low-carbon electricity markets," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 30(3), pages 574-593, October.

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    More about this item

    Keywords

    Market-clearing prices; Quadratic costs; Ramping costs; Unit commitment; Mixed-integer quadratic programming; Renewable energy sources;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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