Equilibrium of Auction Markets with Unit Commitment: The Need for Augmented Pricing

We discuss issues and methods for attaining equilibrium in electric power auction markets with unit commitment. We consider a generation-side competition whereby producers are profit maximizing agents subject to prices only. For expository purposes, we will consider the single-period unit commitment problem, which is still quite rich for this presentation. We show that it is possible to eliminate the duality gap or cycling that occurs in a decentralized decision-making environment that encompasses discontinuous nonconvex programs. This result extends previous work on coordination of locally constrained self-interested agents, and it has a broad scope of applications that may be of interest to power systems engineers, market designers, economists, and mathematicians.