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Bidding in a Competitive Energy Market. Professor Tom Overbye Department of Electrical and Computer Engineering UIUC Power Affiliates Program May 11, 2001. ECE 497TO : Teaching Electricity Market Analysis and Design.
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Bidding in a Competitive Energy Market Professor Tom Overbye Department of Electrical andComputer EngineeringUIUC Power Affiliates Program May 11, 2001
ECE 497TO : Teaching Electricity Market Analysis and Design • Markets are replacing many of the former planning and operation tools and functions. • ECE 497TO covered aspects of both traditional power system analysis, and the emerging auction-based markets • Talk describes a auction-based market experiment the students participated in over two weeks.
Auctions • In its simplest form, an auction is a mechanism of allocating scarce goods based upon competition • a seller wishes to obtain as much money as possible, and a buyer wants to pay as little as necessary. • An auction is usually considered efficient if resources accrue to those who value them most highly
Auctions, cont’d. • Auctions can be either one-sided with a single monopolist seller/buyer or a double auction with multiple parties in each category • bid to buy, offer to sell • Most people’s experience with auctions is with one-sided auctions in which there is a monopolist seller and multiple buyers • multiple participants bid on the object(s)
Auctions, cont’d. • Most electricity markets are currently one-sided, with the ISO functioning as a monopolist buyer, while multiple generating companies make offers to sell their generation • Auction provides mechanism for participants to reveal their true costs while satisfying their desires to buy low and/or sell high. • Auctions differ on the price participants receive and the information they see along the way
Types of Auctions • Sealed-bid auctions (all participants submit offers simultaneously) • uniform price auctions (all successful participants get paid the same) • discriminative auctions (participants paid what they offer) • Simultaneous auctions • English (ascending price to buy) • Dutch (descending price to buy)
Uniform Price Auctions • Uniform price auctions are sealed offer auctions in which sellers make simultaneous decisions (done when submitting offers). • Generators are paid the last accepted offer • Provides incentive to offer at marginal cost since higher values cause offers to be rejected • reigning price should match marginal cost • Price caps are needed to prevent prices from rising up to infinity during shortages
Discriminative Auctions • Similar to Uniform Price Auction in that generators submit sealed offers; ISO accepts the offers in ascending order until demand requirements are satisfied. • Now generators gets paid what they offer. • Also known as pay as bid (or pay as offer). • With many participants offers should approach costs
Experimental Setup • The 12 students were divided into two groups of six; each group simulated a market for 50 trading periods • Each period the students saw a forecasted total MW load. Students had to submit offers for the power output of one 100 MW generator • ISO determined the dispatch of each generator • Students competed for real cash profits • Four different experiments were done
ISO Receives Offers for Each Unit Unit 1 Offers
Composite Offers for One Period Offer Price Power Needed (MW)
