Indirect Mechanism Design for Efficient and Stable Renewable Energy Aggregation

TL;DR

This paper introduces an indirect mechanism design framework for aggregating renewable energy producers, ensuring efficiency, stability, and collusion resistance in power markets, supported by theoretical proofs and extensive simulations.

Contribution

It develops a novel payoff allocation mechanism derived from a competitive equilibrium, with proven unique Nash equilibrium and desirable properties like efficiency and stability.

Findings

Unique pure Nash equilibrium exists with a closed-form expression.

The mechanism achieves efficiency with a Price of Anarchy of one.

Simulations confirm theoretical properties and robustness.

Abstract

Mechanism design is studied for aggregating renewable power producers (RPPs) in a two-settlement power market. Employing an indirect mechanism design framework, a payoff allocation mechanism (PAM) is derived from the competitive equilibrium (CE) of a specially formulated market with transferrable payoff. Given the designed mechanism, the strategic behaviors of the participating RPPs entail a non-cooperative game: It is proven that a unique pure Nash equilibrium (NE) exists among the RPPs, for which a closed-form expression is found. Moreover, it is proven that the designed mechanism achieves a number of key desirable properties at the NE: these include efficiency (i.e., an ideal "Price of Anarchy" of one), stability (i.e., "in the core" from a coalitional game theoretic perspective), and no collusion. In addition, it is shown that a set of desirable "ex-post" properties are also achieved by the designed mechanism. Extensive simulations are conducted and corroborate the theoretical results.