February 4, 2005
All rights reserved to Shmuel Oren, UC Berkeley
PSERC
The Basic Tradeoffs
nA decentralized electricity market is inherently
incomplete. The set of
products traded does not capture all the complexities of the system (e.g. ramp rate and reactive power are not priced). Results in suboptimal dispatch
and uplifting of non-priced
coordination costs, which are susceptible
to gaming.
nA centralized market must use multidimensional bidding schemes (e.g. energy, start up costs, ramp rate, inflexibility etc.) and complex market clearing rules. Susceptible to incentive compatibility problems (bidders
can game the market by revealing
false information).