Market Clearing Approach Considering Explicit Incentive Compatibility For Electricity Spot Market

“To peak carbon dioxide emissions before 2030 and achieve carbon neutrality before2060” is a major strategic decision in China.Market mechanism is the most efficient means of resource allocation and climate governance.In November 2021,at the 22 nd meeting of the Central Committee for Comprehensively Deepening Reform,President Xi Jinping stressed that the formation of a unified and open,competitive and orderly,safe and efficient,and well-governed electricity market system should be accelerated.As a key link between medium-and long-term power trading and real-time operation,the electricity spot market can effectively discover the electricity price and provide the signal of short-term supply-demand balance and long-term investment.Locational marginal pricing(LMP)is widely utilized by major regional electricity markets in domestic and foreign.In ideal conditions,LMP is break-even,individually rationality and incentive-compatible.However,the complexity of power system operation and the diversity of the market environment make it difficult for LMP to achieve the desired incentive function.Consequently,incentive distortion occurs and the guiding function of LMP face a risk of weakening or even failure.The reasons of incentive distortion mainly divided into two categories: 1)the split of "dispatch-pricing",namely primal-dual problem,makes that generators achieve less revenue than ideal and consequently loses the willingness to obey the scheduling instructions;2)LMP is derives from principle of scarcity.The high scarcity in scenarios,caused by network congestion,incurs generators’ strategic bidding.This results in social welfare and market disruption.In order to solve these problems,this paper focuses on Electricity Spot Market Clearing Method Considering Explicit Incentive Compatibility” and conducts further investigation,including:1.The mechanism of LMP’s incentive distortion in spot market is analyzed.A general market clearing framework with explicit incentive compatibility is proposed.Firstly,the expressions and physical properties of LMP are analyzed based on DC market model,including properties of incentive-compatible and non-negative market surplus.Secondly,the incentive incompatibility problems of LMP in the problematic scenario for main market clearing processes are presented.Finally,the general market clearing framework with explicit incentive compatibility is proposed and it is transformed according to different types of incentive incompatibility problems.2.To handle the price spikes under constraint violations,the electricity pricing method by explicitly formulating incentive compatibility characteristics is proposed.Firstly,a theoretical derivation is presented to analyze the mechanism of price spikes under constraint violations.And the pricing model via explicitly formulating incentive compatibility characteristics is proposed.Then,the two-layer optimal pricing model and transformation method for computation efficiency are prevented.Finally,we propose a multi-period optimal pricing method and a transformation method based on the KarushKuhn-Tucker(KKT)conditions,which focus on price spikes in multi-period circumstances.The experiments show that the proposed method can effectively control price spikes while obtaining a smaller uplift payment than existing methods.3.To solve AC infeasibility problem caused by the deviation of the market clearing solutions and physical operating points,the market clearing method with built-in AC feasibility correction cost is proposed,which restores AC feasibility by market corrections.Firstly,the market clearing method with built-in AC feasibility correction cost is proposed based on DC market model.This method constructs a market clearing improvement model by violation information of AC power flow.Then,the key factors that influence the AC feasibility restoration efficiency are analyzed and proved.Finally,the AC feasibility correction method based on linearized optimal power flow and the compensation unit ranking method are proposed.based on power transfer distribution factor is proposed.As a result,social welfare losses and infeasibility caused by irrational selection of compensation generator can be avoided.The experiments show that the proposed method can effectively reduce violations of AC power flow.Prices can reflect the AC feasibility correction cost,which will not incur additional uplift payment.4.To address with the serious strategic bidding behavior of generators due to network congestion or other scenarios,the market power assessment method considering network congestion and a hybrid pricing method based on the substitution benefit are proposed.Firstly,a multi-stage simulation of market power assessment method is proposed.Then,the new indexes are proposed to assess generators’ bidding behavior.Finally,in order to mitigate the market power abuse,a hybrid pricing approach based on Vickrey-Clarke-Groves(VCG)mechanism and explicit formulation of incentive compatibility constraint is further proposed.The pricing approach splits the relationship of generator’s bidding and revenue and mitigates high prices caused by strategic bidding and guarantee ideal revenue of generators.The experiments that the proposed method can motivate generators’ truly bidding and restore the inflated prices by market power abuse.In summary,this paper investigates the market clearing method with explicit incentive-compatible characteristic,and proposes the ideas of "explicit formulation of generator’s incentive compatibility","built-in out-of-market correction cost" and "generator’s substitution benefits".The proposed method can be combined with the existing spot market clearing method to enhance the incentive-guiding role of electricity price in the spot market and provide technical support for effective market resource allocation.