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Design of a Stochastic Electricity Market Mechanism with a High Proportion of Renewable Energy

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Listed:
  • Yifeng Liu

    (Hubei Power Exchange Center Co., Ltd., Wuhan 430040, China)

  • Meng Chen

    (Hubei Power Exchange Center Co., Ltd., Wuhan 430040, China)

  • Yuhong Fan

    (Institute of Economics and Technology, State Grid Hubei Electric Power Co., Ltd., Wuhan 430077, China)

  • Liming Ying

    (Hubei Key Laboratory of Power Equipment & System Security for Integrated Energy, School of Electrical Engineering and Automation, Wuhan University, Wuhan 430072, China)

  • Xue Cui

    (Hubei Key Laboratory of Power Equipment & System Security for Integrated Energy, School of Electrical Engineering and Automation, Wuhan University, Wuhan 430072, China)

  • Xuyue Zou

    (Hubei Key Laboratory of Power Equipment & System Security for Integrated Energy, School of Electrical Engineering and Automation, Wuhan University, Wuhan 430072, China)

Abstract

Renewable energy, such as wind power and photovoltaic power, has uncertain and intermittent characteristics and zero marginal cost characteristics. The traditional power market mechanism is difficult to adapt to the new power system with a high proportion of renewable energy, and the original market system needs to be reformed. This paper discusses the application of a VCG auction mechanism in the electricity market, proposes a two-stage VCG market-clearing model based on the VCG mechanism, including the day-ahead market and the real-time market, and discusses the nature of the VCG mechanism. In order to address the discrepancy between the actual output of stochastic generator sets in the real-time market and their pre-scheduled output in the day-ahead market due to prediction deviations, a method for calculating punitive costs is proposed. A reallocation method based on market entities’ contributing factors to budget imbalance is proposed to address the issue of budget imbalance under the VCG mechanism, in order to achieve revenue and expenditure balance. Through an example, the incentive compatibility characteristics of the VCG mechanism are verified, the problems of the locational marginal pricing (LMP) mechanism in the stochastic electricity market with a high proportion of renewable energy are analyzed, the electricity prices of the LMP mechanism and the VCG mechanism under different renewable energy proportions are compared, and the redistribution of the budget imbalance of the VCG mechanism is analyzed.

Suggested Citation

  • Yifeng Liu & Meng Chen & Yuhong Fan & Liming Ying & Xue Cui & Xuyue Zou, 2024. "Design of a Stochastic Electricity Market Mechanism with a High Proportion of Renewable Energy," Energies, MDPI, vol. 17(12), pages 1-21, June.
    • Handle: RePEc:gam:jeners:v:17:y:2024:i:12:p:3044-:d:1418714
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    References listed on IDEAS

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    2. Greve, Thomas & Teng, Fei & Pollitt, Michael G. & Strbac, Goran, 2018. "A system operator’s utility function for the frequency response market," Applied Energy, Elsevier, vol. 231(C), pages 562-569.
    3. Peter Cramton, 2017. "Electricity market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 589-612.
    4. Pierre Pinson, 2023. "What may future electricity markets look like?," Papers 2302.02833, arXiv.org, revised Feb 2023.
    5. Hagen, Martin, 2023. "Collusion-proof mechanisms for multi-unit procurement," Games and Economic Behavior, Elsevier, vol. 138(C), pages 281-298.
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