Analysis of Quantized Double Auctions with Application to Competitive Electricity Markets

In recently proposed electricity markets, price-based competitive behaviours of power suppliers (i.e., generators), energy service providers and large users (i.e., consumers) have been formulated using various auction algorithms (see Post et al., 1995; Wolfram, 1998; Dekrajangpetch and Shebl, 2000; Nicolaisen et al., 2001; Swider and Weber, 2007). In this paper, quantized Progressive Second Price (PSP) auction algorithms are presented for competitive electricity systems, especially for short-run electric power markets. In Jia and Caines (2008, 2010), two quantized PSP auction algorithms were introduced and analyzed for demand markets, which are called, respectively, the Aggressive-Defensive Quantized PSP (ADQ-PSP) algorithm and the Unique-limit Quantized PSP (UQ-PSP) algorithm. Here we first present an algorithm combined with ADQ-PSP and UQ-PSP features, and apply it to a double power auction system where competition on both power generators and energy service providers (and/or large users) is considered. Double auctions are formulated in this work as two single-sided quantized auctions which depend upon joint market quantities and price constraints. The extended algorithm inherits the performance properties of ADQ-PSP and UQ-PSP in terms of both the social welfare maximization and the rapid convergence rate.