On the Double Auction Mechanism Design for Electricity Market

The electricity market, due to its complex under-lying physical constraints, suffers from market manipulation. Most existing markets employ the double auction to organize the markets: the independent system operator collects the bidding information from both the supply sides and solves the Walrasian equilibrium to conduct dispatch. Market manipulation arises when market players strategically bid their information. Hence to contain the manipulation, one promising solution is to design the double auction mechanism to induce truthful bidding. In this work, we customize four double auction mechanisms (Walrasian equilibrium Mechanism, VCG mechanism, MUDA (Lottery) mechanism, and MUDA (VCG) mechanism) for the electricity market. After proposing key metrics to evaluate the performance of various mechanisms, we conduct extensive numerical studies based on the real market data for a thorough comparison between the four mechanisms and identify the unique features for each mechanism. This could serve as the theoretical guidance for the double auction mechanism design for the electricity market.