A MIP framework for non-convex uniform price day-ahead electricity auctions

It is well known that a market equilibrium with uniform prices often does not exist in non-convex day-ahead electricity auctions. We consider the case of the non-convex, uniform-price Pan-European day-ahead electricity market “PCR” (Price Coupling of Regions), with non-convexities arising from so-ca...

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Vydáno v:	EURO journal on computational optimization Ročník 5; číslo 1-2; s. 263 - 284
Hlavní autoři:	Madani, Mehdi, Van Vyve, Mathieu
Médium:	Journal Article
Jazyk:	angličtina
Vydáno:	Berlin/Heidelberg Elsevier Ltd 01.03.2017 Springer Berlin Heidelberg Springer Nature B.V Elsevier
Témata:	90-08 90C06 90C11 Algorithms Auctions Bids Business and Management Costs Day-ahead electricity market auctions Demand Economic analysis Economic theory Economics Electric industries Electricity Electricity distribution Electricity pricing Equilibrium prices Integer programming Management Science Market coupling Market equilibrium Market prices Market statistics Markets Mathematical analysis Mathematical models Mixed integer programming Non-convexities Operations Management Operations Research Operations Research/Decision Theory Opportunity costs Optimization Original Paper Power Prices Pricing Shadow prices Non-convexities 90C11 Equilibrium prices 90-08 90C06 Mixed integer programming Day-ahead electricity market auctions Market coupling
ISSN:	2192-4406, 2192-4414
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Popis
Shrnutí:	It is well known that a market equilibrium with uniform prices often does not exist in non-convex day-ahead electricity auctions. We consider the case of the non-convex, uniform-price Pan-European day-ahead electricity market “PCR” (Price Coupling of Regions), with non-convexities arising from so-called complex and block orders. Extending previous results, we propose a new primal-dual framework for these auctions, which has applications in both economic analysis and algorithm design. The contribution here is threefold. First, from the algorithmic point of view, we give a non-trivial exact (i.e., not approximate) linearization of a non-convex ‘minimum income condition’ that must hold for complex orders arising from the Spanish market, avoiding the introduction of any auxiliary variables, and allowing us to solve market clearing instances involving most of the bidding products proposed in PCR using off-the-shelf MIP solvers. Second, from the economic analysis point of view, we give the first MILP formulations of optimization problems such as the maximization of the traded volume, or the minimization of opportunity costs of paradoxically rejected block bids. We first show on a toy example that these two objectives are distinct from maximizing welfare. Third, we provide numerical experiments on realistic large-scale instances. They illustrate the efficiency of the approach, as well as the economics trade-offs that may occur in practice.
Bibliografie:	SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 14 ObjectType-Article-1 ObjectType-Feature-2 content type line 23
ISSN:	2192-4406 2192-4414
DOI:	10.1007/s13675-015-0047-6