Allocation and Pricing in Electricity Markets

• Applicant: Professor Dr. Martin Bichler
• Subject Area: Operations Management and Computer Science for Business Administration
• Term: since 2023
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 519135171

APEM aims to develop models and simulators to analyze pricing rules on electricity spot markets. We want to derive prices that best reflect marginal costs on a network node in a coupled electricity market with non-convex preferences of participants. This question has regained interest due to the strongly increasing levels of renewable energy sources, which have different cost characteristics. We want to explore the impact of different approximations and convex relaxations of the underlying power flow problem on prices and compare such nodal prices to the zonal prices currently used in Europe. While the fundamental question of pricing in non-convex markets has received significant attention in the literature, the specifics of coupled electricity markets (e.g., transmission constraints between nodes) provide new challenges for fundamental research that have often been ignored. We want to understand the scope for which the welfare theorems hold in such markets and to which extent envy-freeness and budget balance can be satisfied in coupled and non-convex markets.

• DFG Programme: Research Grants (Transfer Project)
• Application Partner: TenneT TSO GmbH
• Cooperation Partners: Professor Dr. Björn Steven Häckel; Professor Dr. Jens Strüker