Recovery mechanisms in a joint energy/reserve day-ahead electricity market with non-convexities

Abstract

The goal of this paper is to evaluate the incentive compatibility of several cost- and bid-based recovery mechanisms that may be implemented in a wholesale electricity market to make the generation units whole in the presence of non-convexities, which are due to unit commitment costs and capacity constraints. To this end, we simulate the bidding behavior of the participants in a simplified model of the Greek joint energy/reserve day-ahead electricity market, where we assume that the players (units) participate as potential price-makers in a non-cooperative game with complete information that is repeated for many rounds. The results suggest that a mechanism based on bid recovery with a regulated cap is quite promising.