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On the Efficiency of Local Electricity Markets Under Decentralized and Centralized Designs: A Multi-leader Stackelberg Game Analysis

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  • Hélène Le Cadre

    (EnergyVille)

Abstract

In this paper, we analytically compare centralized and decentralized market designs involving a national and local market operators, strategic generators having market power and bidding sequentially in local markets , to determine which design is more efficient for the procurement of energy. In the centralized design, used as benchmark, the national market operator optimizes the exchanges between local markets and the genera-tors' block bids. In the decentralized design, generators act as Stackelberg leaders, anticipating the local market prices and the flows on the transmission lines. Clearing of the local markets can be either simultaneous or sequential. The resulting two-stage game with competitive leaders that are not price takers is formulated as a bilevel mathematical programming problem which is reformulated as a Nash-Cournot game, and conditions for existence and uniqueness of market equilibrium are studied. Imperfect information is also considered, resulting from the lack of incentives from the generators to share their RES-based generations. Through a case study, we determine that the decentralized design is as efficient as the centralized one with high share of renewables, using as performance measure the Price of Anarchy, and that imperfect information has a limited impact on the efficiency of the decentralized market design. Furthermore, we check numerically that there exists an upper-limit on the block bid length maximizing the social welfare under both centralized and decentralized designs.

Suggested Citation

  • Hélène Le Cadre, 2018. "On the Efficiency of Local Electricity Markets Under Decentralized and Centralized Designs: A Multi-leader Stackelberg Game Analysis," Working Papers hal-01619885, HAL.
    • Handle: RePEc:hal:wpaper:hal-01619885
    Note: View the original document on HAL open archive server: https://hal.science/hal-01619885v2
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    References listed on IDEAS

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    Cited by:

    1. Le Cadre, Hélène & Mezghani, Ilyès & Papavasiliou, Anthony, 2019. "A game-theoretic analysis of transmission-distribution system operator coordination," European Journal of Operational Research, Elsevier, vol. 274(1), pages 317-339.
    2. Le Cadre, Hélène & Pagnoncelli, Bernardo & Homem-de-Mello, Tito & Beaude, Olivier, 2019. "Designing coalition-based fair and stable pricing mechanisms under private information on consumers’ reservation prices," European Journal of Operational Research, Elsevier, vol. 272(1), pages 270-291.
    3. Schmitt, Carlo & Schumann, Klemens & Kollenda, Katharina & Blank, Andreas & Rebenaque, Olivier & Dronne, Théo & Martin, Arnault & Vassilopoulos, Philippe & Roques, Fabien & Moser, Albert, 2022. "How will local energy markets influence the pan-European day-ahead market and transmission systems? A case study for local markets in France and Germany," Applied Energy, Elsevier, vol. 325(C).
    4. Hélène Le Cadre & Enrique Rivero Puente & Hanspeter Höschle, 2019. "Consensus Reaching With Heterogeneous User Preferences," Working Papers hal-01874798, HAL.
    5. Le Cadre, Hélène & Jacquot, Paulin & Wan, Cheng & Alasseur, Clémence, 2020. "Peer-to-peer electricity market analysis: From variational to Generalized Nash Equilibrium," European Journal of Operational Research, Elsevier, vol. 282(2), pages 753-771.
    6. Hélène Le Cadre & Bernardo Pagnoncelli & Tito Homem-De-Mello & Olivier Beaude, 2018. "Designing Coalition-Based Fair and Stable Pricing Mechanisms Under Private Information on Consumers' Reservation Prices," Working Papers hal-01353763, HAL.
    7. Hélène Le Cadre & Bernardo Pagnoncelli & Tito Homem-De-Mello & Olivier Beaude, 2018. "Designing Coalition-Based Fair and Stable Pricing Mechanisms Under Private Information on Consumers' Reservation Prices," Post-Print hal-01353763, HAL.

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    More about this item

    Keywords

    Bilevel Mathematical Programming; Complementarity Theory; Electricity Market; Bidding; Price of Anarchy;
    All these keywords.

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