Transcript (Uniform Price Auction).

An Introduction to Electricity Auctions
Using PowerWeb Experiments
William Schulze
Department of Applied Economics and Management
Cornell University
[email protected]
Power System Engineering Research Center
1
OUTLINE
• Part I
• Testing Different Types of Auction Using PowerWeb
• Part II
• Testing the Soft-Cap Auction Used in California
2
PART I
• Testing Different Types of Auction
• Uniform Price Auction
• Discriminative Auction
Source:
Testing the Performance of Uniform Price and Discriminative Auctions
by
Timothy D. Mount, William D. Schulze, Robert J. Thomas, and Ray D. Zimmerman
3
PowerWeb Network
4
PowerWeb: Offer Submission Page
5
PowerWeb: Auction Results
6
Uniform Price Auction
• Each supplier submits multiple offers to sell electricity
(different quantity/price combinations) into a central auction.
• All offers submitted into the auction are ranked from lowest
price to highest price.
• Select the lowest priced offers until supply equals demand.
• The last (highest priced) accepted offer sets the price for all
accepted offers.
• Typical offer (supply) curve takes the form of a “hockey stick”.
7
Offers Submitted by Six Firms into a
Uniform Price Auction
8
Market Prices for a Uniform Price
Auction with Price Inelastic Load
(Average Price $76.71/MWh)
9
Discriminative Auction
• Each supplier submits multiple offers to sell electricity
(different quantity/price combinations) into a central auction.
• All offers submitted into the auction are ranked from lowest
price to highest price.
• Select the lowest priced offers until supply equals demand.
• Each accepted offer is paid the offered price.
• Typical offer (supply) curve is relatively flat (price elastic).
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What Happens if Firms are Paid
Their Offers (Discriminative Auction)?
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Market Prices for a Discriminative Price
Auction with Price Inelastic Load
(Average Price $83.02/MWh)
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Part I: Conclusions
•
Prices in the Uniform Price Auction are volatile and substantially above competitive
levels.
•
Prices in the Discriminative Auction are much less volatile but even higher than the
average prices in the uniform price auction.
•
Prices in the Uniform Price Auction are lower with price-responsive load because
suppliers speculate (submit high offers) with only a few blocks of capacity and the offer
curve is shaped like a hockey stick.
•
Prices in the Discriminative Price Auction are expected to be relatively insensitive to
price-responsive load because the offer curve is flat (highly price elastic) and suppliers
speculate with most blocks of capacity.
•
Making load respond to price using a uniform price auction is a more effective way to
mitigate high prices than changing to a discriminative auction.
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PART II
Testing the Soft-Cap Auction
Used in California
Source:
The California Electricity Crisis: An Experimental Investigation
of the Effects of Changing the Market Rules
by
Timothy D. Mount, Robert J. Thomas, Christian A. Vossler and Ray D. Zimmerman
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What Happened in California during
the Winter of 2001?
$/ MWh
800
P_Ca p:$ 750/MWh
700
600
P_Ca p:$ 500/MWh
500
400
300
P_Ca p:$ 250/MWh
P_Ca p:$ 250/MWh
200
S_Ca p:$ 150/MWh
100
0
1/ 1/99 4/ 1/99
P_Ca p:$ 92.87/MWh
7/ 1/99 10/1/99 1/ 1/00 4/ 1/00
7/ 1/00 10/1/00 1/ 1/01 4/ 1/01
Figure 1: Spot Prices at Southern California and the Price Caps
Blue CAISO Hard Cap
Red CAISO Soft Cap
Black WECC Hard Cap
(Source, Energy Market Report and the CAISO)
7/ 1/01 10/1/01
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Soft-Cap Auction
•
Each supplier submits multiple offers to sell electricity (different
quantity/price combinations) into a central auction.
•
All offers submitted into the auction are ranked from lowest price to
highest price.
•
Select the lowest priced offers until supply equals demand.
•
All offers at or below the soft-cap are paid the last accepted offer
(Uniform Price Auction).
•
Accepted offers above the soft-cap are paid the actual offer
(Discriminative Auction).
•
Typical offer (supply) curve is ?????
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Typical Offer (Supply) Curve
Discriminative Auction
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Average Price - Students
Soft-Cap Auction - Inelastic Load
Exp eriment 2: Average Market Price per Period, Student Sub jects,
Soft-Cap Auction without Price-Responsive Load .
100
90
Price ($/MWh)
80
70
60
50
40
0
5
10
15
20
25
30
35
40
45
50
Period
Dotted line is the “competitive” price (offers equal the true cost)
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Part II: Conclusions
•
Prices in the Uniform Price Auctions (Tests 1 & 4) drop
significantly when generation costs decrease.
•
Prices in the Soft-Cap Auctions (Tests 2 & 3) do NOT
drop significantly when generation costs decrease.
•
Prices in the Uniform Price Auction (Tests 4 v 1) are
MORE sensitive to lower generation costs with priceresponsive load.
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Why Use PowerWeb to Test Markets?
• Market structures for electricity auctions are too complicated
to derive analytical results.
• PowerWeb tests are inexpensive compared to experimenting
directly on the public.
• Paying participants in market tests on the basis of their
performance duplicates market behavior effectively.
• The effects of specific market characteristics can be isolated
and tested.
• PowerWeb supports a full AC network, so that the market
implications of congestion and ancillary services -- as well as
real power -- can be studied.
• TEST NOW or PAY LATER
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