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A future auction mechanism for distributed generation

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Listed:
  • Greve, T.
  • Pollitt, M.

Abstract

Auction designs in current electricity markets will need to be adjusted to cope with massively increased small-scale distributed generation and demand response, as these are integrated into the electricity system. We present a VCG mechanism that addresses the two most important challenges facing future power systems, namely uncertainty of costs and complexity of bidding strategies. The mechanism is built up around heterogeneous goods, useful for different levels of response time of electricity or different Quality of Service agreements, package bidding and a proxy agent. The proxy agent will ensure optimal bids from non-professional suppliers. Our mechanism has the expected desirable properties by design.

Suggested Citation

  • Greve, T. & Pollitt, M., 2016. "A future auction mechanism for distributed generation," Cambridge Working Papers in Economics 1672, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1672
    Note: tg336
    as

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    References listed on IDEAS

    as
    1. Paul Joskow & Jean Tirole, 2007. "Reliability and competitive electricity markets," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 60-84, March.
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    More about this item

    Keywords

    Future electricity networks; electricity subscriptions; proxy agent; VCG auction mechanism;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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