Power market dynamics: the statistical mechanics of transaction-based control

TL;DR

This paper applies statistical mechanics analogies to power markets, modeling transaction-based control to understand resource allocation and emergent optimal control, validated by real ISO data analysis.

Contribution

It introduces a thermodynamics-inspired model for power market dynamics, providing a novel analytical framework validated with actual market data.

Findings

Model accurately describes power market data

Reveals behavioral similarities across different ISOs

Highlights differences in market dynamics

Abstract

Statistical mechanics provides a useful analog for understanding the behavior of complex adaptive systems, including power markets and the power systems they intend to govern. Transaction-based control is founded on the conjecture that the regulation of complex systems based on price-mediated strategies (e.g., auctions, markets) results in an optimal allocation of resources and an emergent optimal control. We outline a model based on strict analogies to thermodynamic quantities. The model accurately describes power market data collected from three North American independent system operators (ISO) in recent years. The ISO data is analyzed, comparing the behavioral similarities and differences that are observed.