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Application of the Level Method for Computing Locational Convex Hull Prices

Author

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  • Stevens, Nicolas

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

  • Papavasiliou, Anthony

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

Abstract

Convex hull pricing is a well-documented method for coping with the non-existence of uniform clearing prices in electricity markets with non-convex costs and constraints. We revisit primal and dual methods for computing convex hull prices, and discuss the positioning of existing approximation methods in this taxonomy. We propose a dual decomposition algorithm known as the Level Method and we adapt the basic algorithm to the specificities of convex hull pricing. We benchmark its performance against a column generation algorithm that has recently been proposed in the literature. We provide empirical evidence about the favorable performance of our algorithm on large test instances based on PJM and Central Europe.

Suggested Citation

  • Stevens, Nicolas & Papavasiliou, Anthony, 2022. "Application of the Level Method for Computing Locational Convex Hull Prices," LIDAM Discussion Papers CORE 2022002, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2022002
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    Cited by:

    1. Stevens, Nicolas & Papavasiliou, Anthony & Smeers, Yves, 2024. "On some advantages of convex hull pricing for the European electricity auction," Energy Economics, Elsevier, vol. 134(C).
    2. Li, Ningning & Gao, Yan, 2023. "Real-time pricing based on convex hull method for smart grid with multiple generating units," Energy, Elsevier, vol. 285(C).

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    Keywords

    Convex hull pricing ; Non-uniform pricing ; Level method ; Bundle methods;
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