Externality Value-Based Pricing Mechanism for Energy and Ancillary Service Markets

Abstract

The high proportion of renewable energy integration and the sharp fluctuation of load bring huge backup demand to the power system, which requires the auxiliary service of thermal power units to ensure the safety of the power system. However, the widely used marginal price mechanism is difficult to identify the externalities value of market members and the value of ancillary services provided by generators. To accurately identify the externality value of market members, the Vickey-Clarke-Groves (VCG) mechanism based on incremental costs was introduced. Compared with the marginal price mechanism, the VCG mechanism requires removing the generators sequentially and re-optimizing, which is computationally inefficient. An accelerated algorithm based on optimal base replacement is proposed, which uses the dual simplex method to perform optimal basis replacement based on the initial optimal basis to obtain the optimal solution of the new problem after removing generators. Case studies based on modified IEEE30-bus system demonstrate the significant improvement of the acceleration algorithm on the computational efficiency of the VCG mechanism.