An Incentive-Compatible Scheme for Electricity Cooperatives: An Axiomatic Approach

TL;DR

This paper proposes an axiomatic, incentive-compatible scheme for electricity cooperatives that encourages truthful reporting and participation, demonstrating improved load management and price stability using real market data.

Contribution

It introduces a novel axiomatic approach for calculating bids and cost sharing in autonomous electricity cooperatives, ensuring incentive compatibility and truthful reporting.

Findings

Consumers report loads truthfully under the scheme

Reduction in electricity price variation for participants

Participants experience comparative benefits

Abstract

This paper introduces a new scheme for autonomous electricity cooperatives, called predictive cooperative (PCP), which aggregates commercial and residential electricity consumers and participates in the electricity market on behalf of its members. An axiomatic approach is proposed to calculate the day-ahead bid and to disaggregate the collective cost among participating consumers. The resulting formulation is shown to keep the members incentivized to both participate in the cooperative and remain truthful in reporting their expected loads. The scheme is implemented using PJM (world's largest wholesale electricity market) real-time and day-ahead price data for 2015 and a collection of residential and commercial load profiles. The model performance of this framework is compared to that of real-time pricing (RTP) scheme, in which wholesale market prices are directly applied to individual consumers. The results show truthful load announcement by consumers, reduction in electricity price variation for all consumers, and comparative benefits for participants.