Randomized auction design for electricity markets between grids and microgrids

Abstract

This work studies electricity markets between power grids and microgrids, an emerging paradigm of electric power generation and supply. It is among the first that addresses the economic challenges arising from such grid integration, and represents the first power auction mechanism design that explicitly handles the Unit Commitment Problem (UCP), a key challenge in power grid optimization previously investigated only for centralized cooperative algorithms. The proposed solution leverages a recent result in theoretical computer science that can decompose an optimal fractional (infeasible) solution to NP-hard problems into a convex combination of integral (feasible) solutions. The end result includes randomized power auctions that are (approximately) truthful and computationally efficient, and achieve small approximation ratios for grid-wide social welfare under UCP constraints and temporal demand correlations. Both power markets with grid-to-microgrid and microgrid-to-grid energy sales are studied, with an auction designed for each, under the same randomized power auction framework. Trace driven simulations are conducted to verify the efficacy of the two proposed inter-grid power auctions.