Model

Abstract

The modeled electricity market is based on a power exchange with an auc tion system balancing supply and demand. The auctioneer, who is also responsible for the electricity grid, acts as a proxy for consumers and buys electricity from pro ducers. He can choose among three auction types. The uniform price auction pays every winning generator the same price. In the discriminatory auction, the price of the winner is his own bid. Payments of the generalized second-price auction follow the idea of the second price or Vickrey auction. Generators own one power plant each. Producing more electricity than the production capacity is not feasible. Pro duction costs are private information and affiliated. Affiliated random variables are either independent or positively correlated. The concept of affiliation was introduced to auction theory by Milgrom and Weber (1982). A simple probability density func tion of affiliated production costs is given. It is used for all examples of the model. The numerical results of the examples are presented graphically.