Affiliations: [a] Centrum Wiskunde en Informatica, Amsterdam, The Netherlands | [b] Technical University Delft, Delft, The Netherlands
Correspondence:
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Corresponding author: Nicolas Höning, Intelligent Systems group, CWI Amsterdam, Science Park 123, 1098 XG Amsterdam, The Netherlands. E-mail: nicolas@cwi.nl
Abstract: In future energy systems, peaks in the daily electricity generation and consumption are expected to increase. The “smart grid” concept aims to maintain high levels of efficiency in the energy system by establishing distributed intelligence. Software agents (operating on devices with unknown computational capabilities) can implement dynamic and autonomous decision making about energy usage and generation, e.g. in domestic households, farms or offices. To reach satisfactory levels of efficiency and reliability, it is crucial to include planning-ahead of the energy-involving activities. Market mechanisms are a promising approach for large-scale coordination problems about energy supply and demand, but existing electricity markets either do not involve planning-ahead sufficiently or require a high level of sophistication and computing power from participants, which is not suitable for smart grid settings. This paper proposes a new market mechanism for smart grids, ABEM (Ahead- and Balancing Energy Market). ABEM performs an ahead market and a last-minute balancing market, where planning-ahead in the ahead market supports both binding ahead-commitments and reserve capacities in bids (which can be submitted as price functions). These features of planning-ahead reflect the features in modern wholesale electricity markets. However, constructing bids in ABEM is straightforward and fast. We also provide a model of a market with the features mentioned above, which a strategic agent can use to construct a bid (e.g. in ABEM), using a decision-theoretic approach. We evaluate ABEM experimentally in various stochastic scenarios and show favourable outcomes in comparison with a benchmark mechanism.
Keywords: Markets for electricity, agent-based simulation, decision theory, smart grid
