AUCTION THEORY AND ITS APPLICATION IN ELECTRICITY MARKET AUCTION DESIGN Part Two Application of Auction Theory in Electricity Market Auction Design
Chen Haoyong, Wang Xiuli, Wang Xifan, Geng Jian (Xi'an Jiaotong University, Xi'an 710049, China)
The application of auction theory in electricity market auction design is focused on in this paper. The analyses of uniform price auction and pay as bid auction based on auction theory are introduced. Two new auction institutions, namely iterative bidding and block bidding are proposed. The methods of designing incentive compatible auctions are shown. Since the application of auction theory in electricity market auction design has not attracted enough attention in China, there are some other methods used. The paper also introduces these methods, along with the computational algorithms to implement the theoretical auction mechanisms. Some basic issues of electricity market architecture are outlined at the end. Because of the complexity of electricity market auction, not only the introduction of auction theory to electricity market auction design can lay a theoretical groundwork for the implementation of electricity transaction, but also the emergence of energy auction brings new challenges for classic auction theory.