Recovery Mechanisms in Day-Ahead Electricity Markets With Non-Convexities-Part II: Implementation and Numerical Evaluation

Abstract

In centralized day-ahead electricity markets with marginal pricing, unit commitment costs and capacity constraints give rise to non-convexities which may result in losses to some of the participating generating units. To compensate them for these losses, a recovery mechanism is required. In Part I of this two-part paper, we present certain recovery mechanisms that result in recovery payments after the market is cleared. We also propose a methodology for evaluating the bidding strategy behavior of the participating units for each mechanism. In this paper (Part II), we apply this methodology to evaluate the performance and incentive compatibility properties of each recovery mechanism on a test case model representing the Greek joint energy/reserve day-ahead electricity market. Lastly, we perform sensitivity analysis with respect to key parameters and assumptions and we provide directions for further research.