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Research Report

Alternative Formulation of Pay-as-clear Auction in Electricity Markets

Aussel D., Červinka Michal, Henrion R., Pištěk Miroslav

: ÚTIA AV ČR v.v.i, (Praha 2017)

: Research Report 2368

: GA15-00735S, GA ČR

: electricity market, Lagrange multiplier, Independent System Operator

(eng): In widely used formulation of pay-as-clear electricity market the clearing price is given by the Lagrange multiplier of the demand sat- isfaction constraint in the problem of the Independent System Operator (ISO). Following this idea, one may usually calculate the market clearing\nprice analytically even for problems of higher dimensions. However, the economic interpretation of such a market setting is in question, since the minimized criterion does not correspond neither to the cost of production nor to the overall payment of consumers. This observation motivated us\nto propose an alternative clearing mechanism where the total payment of consumers is explicitly minimized. We show existence and uniqueness of the clearing price in such a setting.

: BA