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Payment Mechanisms for Electricity Markets with Uncertain Supply

Ryan Cory-Wright (ryancw***at***mit.edu)
Andy Philpott (a.philpott***at***auckland.ac.nz)
Golbon Zakeri (g.zakeri***at***auckland.ac.nz)

Abstract: This paper provides a framework for deriving payment mechanisms for intermittent, flexible and inflexible electricity generators who are dispatched according to the optimal solution of a stochastic program that minimizes the expected cost of generation plus deviation. The first stage corresponds to a pre-commitment decision, and the second stage corresponds to real-time generation that adapts to different realisations of a random variable. By taking the Lagrangian and decoupling in different ways we study two payment mechanisms with different properties.

Keywords: Electricity Markets, Stochastic Programming, Wind Power, Locational Pricing

Category 1: Stochastic Programming

Category 2: Other Topics (Game Theory )

Category 3: Applications -- OR and Management Sciences (Finance and Economics )

Citation: Cory-Wright R, Philpott A, and Zakeri G. On Payment Mechanisms for Electricity Markets with Uncertain Supply. Submitted to Operations Research Letters, 2017.

Download: [PDF]

Entry Submitted: 08/07/2017
Entry Accepted: 08/08/2017
Entry Last Modified: 09/03/2017

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