Moving from Linear to Conic Markets for Electricity
Résumé
We propose a new forward electricity market framework that admits heterogeneous market participants
with second-order cone strategy sets, who accurately express the nonlinearities in their costs
and constraints through conic bids, and a network operator facing conic operational constraints.
In contrast to the prevalent linear-programming-based electricity markets, we highlight how the
inclusion of second-order cone constraints improves uncertainty-, asset-, and network-awareness
of the market, which is key to the successful transition towards an electricity system based on
weather-dependent renewable energy sources. We analyze our general market-clearing proposal
using conic duality theory to derive efficient spatially-differentiated prices for the multiple commodities,
comprised of energy and flexibility services. Under the assumption of perfect competition,
we prove the equivalence of the centrally-solved market-clearing optimization problem to a competitive
spatial price equilibrium involving a set of rational and self-interested participants and a price
setter. Finally, under common assumptions, we prove that moving towards conic markets does not
incur the loss of desirable economic properties of markets, namely market efficiency, cost recovery,
and revenue adequacy. Our numerical studies focus on the specific use case of uncertainty-aware
market design and demonstrate that the proposed conic market brings advantages over existing
alternatives within the linear programming market framework.
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