Economic efficiency of pool coordinated electricity markets

This paper presents economic efficiency evaluation of pool coordinated electricity markets. The evaluation accounts for the overall cost of power generation, network losses and costs, and various operational constraints. We assume a non-collusive oligopolistic competition. An iterative supply function model is used to characterize the competitive behavior of suppliers. A social welfare function is defined for PoolCo market that operates over multiple hours time span. This leads to a mixed-integer non-linear programming problem. An Augmented Lagrangian approach is used to solve iteratively for global optimal operation schedules (i.e. power generation, load, and price for each bus node) while considering constraints of different sorts. An IEEE 24-bus, eight-supplier, 17-customer test system is used for illustration. The results show deflection of electricity prices from the marginal costs of power generation. The results of 2-year (730 round) market simulations show a range of deadweight efficiency loss between 0.5. (author)