Title: Comparison of electricity market designs for stable decentralized power grids,
Abstract: In this study, we develop a theoretical model of strategic equilibrium
bidding and price-setting behaviour by heterogeneous and boundedly rational
electricity producers and a grid operator in a single electricity market under
uncertain information about production capabilities and electricity demand.
We compare eight different market design variants and several levels of
centralized electricity production that influence the spatial distribution of
producers in the grid, their unit production and curtailment costs, and the
mean and standard deviation of their production capabilities.
Our market design variants differ in three aspects. Producers are either paid
their individual bid price ("pay as bid") or the (higher) market price set by
the grid operator ("uniform pricing"). They are either paid for their bid
quantity ("pay requested") or for their actual supply ("pay supplied") which
may differ due to production uncertainty. Finally, excess production is either
required to be curtailed or may be supplied to the grid.
Overall, we find the combination of uniform pricing, paying for requested
amounts, and required curtailment to perform best or second best in many
respects, and to provide the best compromise between the goals of low economic
costs, low consumer costs, positive profits, low balancing, low workload, and
honest bidding behaviour.