Auctions in the Electricity Market by Stefan Schöne (eds.)

By Stefan Schöne (eds.)

Electricity is a vital commodity traded at strength exchanges. Its expense is especially risky inside of an afternoon and over the 12 months. This increases questions on the potency of the buying and selling rules.

The writer develops a non-cooperative public sale version reading the bidding habit of manufacturers at energy exchanges. manufacturers are constrained via the creation skill in their energy vegetation. creation expenditures are affiliated. this enables for independence or optimistic correlation. the writer analyzes and compares a uniform-price, a discriminatory, and a generalized second-price public sale. optimum bids, expense potency, gains, and purchaser costs are tested. an easy likelihood density functionality of affiliated creation charges is given and used for examples. Numerical effects are presented.

The result of the research can assist enhancing the bidding techniques of manufacturers, choosing the right public sale style at strength exchanges or detecting cost manipulations.

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Sample text

Case A is a winner-takes-all situation. Just one generator is needed to match demand. The winner produces all electricity. His capacity utilization increases with demand. The loser does not sell anything because of his higher bid. Although electricity is a divisible commodity, the decision problem is the same as for an auction with an indivisible commodity. In case B, both generators are necessary to serve demand but the loser does not fully utilize his production capacity. This weakens auctioneer’s position in the market because she now depends on both generators.

16 5. A successful bidder gets his bid paid. A generator bidding under the regime of this auction type can calculate his profit in advance for the case of winning or losing. Because his own bid determines the profit directly, he has to find a balance between a high price and a good chance of selling the most electricity. 2. The rules of the uniform-price auction are the same as those of the discriminatory auction except for the prices paid. Successful bidders are paid a uniform price. It is determined by the highest bid of all successful bidders.

3). The expected cost for d ∈ (0, k] is obtained by c¯ E [c] = 2 c¯ cF (c) [ f (c| c) + Fi (c| c)] dc − 2 c F (c) [1 − F (c| c)] dc. c The expression for d ∈ (k, 2k) is given by E [c] = 2 1 − k k c¯ − 2 d d 2k −1 d +2 c¯ F (c) dc c c¯ F (c) c[ f (c| c) + Fi (c| c)] + F (c| c) dc. c For d ≥ 2k, the expected cost is obtained by c¯ E [c] = c¯ − F (c) dc. 3), are obtained by 46 4 Results E ci = 2β f 2β c¯ + α +β α +β − 2α α +β c¯ F (c) c f (c) + F (c) dc c c¯ F (c) dc. c For simplicity, the following integral is solved separately c¯ c¯ c¯ cF (c) f (c) dc = cF (c)2 − c c F (c) F (c) + c f (c) dc c c¯ c¯ 2 = c¯ − F (c) dc − c  1 = c¯ − 2 cF (c) f (c) dc c c¯  F (c)2 dc .

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