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Virtual Power Plant Auctions

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Abstract

Since their advent in 2001, virtual power plant (VPP) auctions have been implemented widely. In this paper, we describe the simultaneous ascending-clock auction format that has been used for virtually all VPP auctions to date, elaborating on other design choices that most VPP auctions have had in common as well as discussing a few aspects that have varied significantly among VPP auctions. We then evaluate the various objectives of regulators in requiring VPP auctions, concluding that the auctions have been effective devices for facilitating new entry into electricity markets and for developing wholesale power markets.

Suggested Citation

  • Lawrence M. Ausubel & Peter Cramton, 2009. "Virtual Power Plant Auctions," Papers of Peter Cramton 09vpp, University of Maryland, Department of Economics - Peter Cramton, revised 2009.
    • Handle: RePEc:pcc:pccumd:09vpp
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    File URL: https://www.cramton.umd.edu/papers2005-2009/ausubel-cramton-virtual-power-plant-auctions.pdf
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    1. repec:dau:papers:123456789/12068 is not listed on IDEAS
    2. de Frutos, María-Ángeles & Fabra, Natalia, 2012. "How to allocate forward contracts: The case of electricity markets," European Economic Review, Elsevier, vol. 56(3), pages 451-469.
    3. Marambio, Rodrigo & Rudnick, Hugh, 2017. "A novel inclusion of intermittent generation resources in long term energy auctions," Energy Policy, Elsevier, vol. 100(C), pages 29-40.
    4. Ciarreta, Aitor & Nasirov, Shahriyar & Silva, Carlos, 2016. "The development of market power in the Spanish power generation sector: Perspectives after market liberalization," Energy Policy, Elsevier, vol. 96(C), pages 700-710.
    5. Abada, Ibrahim & Belkhouja, Mustapha & Ehrenmann, Andreas, 2025. "On the valuation of legacy power production in liberalized markets via option-pricing," European Journal of Operational Research, Elsevier, vol. 322(3), pages 1005-1024.
    6. Stern, Jon, 2012. "Developing upstream competition in the England and Wales water supply industry: A new approach," Utilities Policy, Elsevier, vol. 21(C), pages 1-16.
    7. Chinmoy, Lakshmi & Iniyan, S. & Goic, Ranko, 2019. "Modeling wind power investments, policies and social benefits for deregulated electricity market – A review," Applied Energy, Elsevier, vol. 242(C), pages 364-377.
    8. Peña, Juan Ignacio, 2011. "Las emisiones primarias de energía en el mercado español: valoración de opciones teórica y de mercado/Primary Energy Emissions in the Spanish Market: Theoretical and Market-Based Option Pricing," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 29, pages 617-626, Agosto.
    9. Federico, Giulio & López, Ángel L., 2013. "Optimal asset divestments with homogeneous products," International Journal of Industrial Organization, Elsevier, vol. 31(1), pages 12-25.
    10. Peter Cramton & Emel Filiz-Ozbay & Erkut Ozbay & Pacharasut Sujarittanonta, 2012. "Discrete clock auctions: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 15(2), pages 309-322, June.
    11. Biegel, Benjamin & Hansen, Lars Henrik & Stoustrup, Jakob & Andersen, Palle & Harbo, Silas, 2014. "Value of flexible consumption in the electricity markets," Energy, Elsevier, vol. 66(C), pages 354-362.
    12. Erik Lundin, 2021. "Market Power and Joint Ownership: Evidence from Nuclear Plants in Sweden," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 485-536, September.
    13. Bruno Bosco, Lucia Parisio and Matteo Pelagatti, 2016. "Price coordination in vertically integrated electricity markets. Theory and empirical evidence," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    14. Brown, David P. & Eckert, Andrew & Shaffer, Blake, 2023. "Evaluating the impact of divestitures on competition: Evidence from Alberta’s wholesale electricity market," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    15. Creti, Anna & Pouyet, Jérôme & Sanin, Maria-Eugenia, 2011. "The Law NOME: Some Implications for the French Electricity Markets," CEPREMAP Working Papers (Docweb) 1102, CEPREMAP.
    16. Luiz T. A. Maurer & Luiz A. Barroso, 2011. "Electricity Auctions : An Overview of Efficient Practices," World Bank Publications - Books, The World Bank Group, number 2346, April.
    17. David P. Brown & Andrew Eckert, 2018. "Analyzing the Impact of Electricity Market Structure Changes and Mergers: The Importance of Forward Commitments," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(1), pages 101-137, February.
    18. Mariusz Swora & Jacek KamiÅ„ski, 2017. "Bringing in Liquidity and Transparency when the Power Sector is Consolidated: The Duty to Trade on the Power Exchange," Review of Economics and Institutions, Università di Perugia, vol. 8(1).
    19. Walsh, Darragh & Malaguzzi Valeri, Laura & Di Cosmo, Valeria, 2016. "Strategic bidding, wind ownership and regulation in a decentralised electricity market," MPRA Paper 71502, University Library of Munich, Germany.
    20. Fei Ye & Lixu Li & Zhiqiang Wang & Yina Li, 2018. "An Asymmetric Nash Bargaining Model for Carbon Emission Quota Allocation among Industries: Evidence from Guangdong Province, China," Sustainability, MDPI, vol. 10(11), pages 1-18, November.
    21. Holmberg, Pär & Tangerås, Thomas, 2021. "Sweden's Energy Investment Challenge," Working Paper Series 1383, Research Institute of Industrial Economics.
    22. Anna Creti & Jerome Pouyet & María-Eugenia Sanin, 2013. "The NOME law: implications for the French electricity market," Journal of Regulatory Economics, Springer, vol. 43(2), pages 196-213, April.
    23. Yusuke Ikuta & Takashi Yanagawa, 2023. "Ownership structure of nuclear power plants for fair competition and efficiency: private low-cost access versus public ownership," International Journal of Economic Policy Studies, Springer, vol. 17(1), pages 307-330, February.

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    Keywords

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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