Incentive compatible mechanisms for power cut allocation in smart grids

Smart grid technology envisages the use of strategic consumers. With demand for power outstripping supply in most countries, this motivates the need for an incentive compatible and efficient mechanism to allocate inevitable power cuts across consumers. In this paper, we propose (i) a reverse auction mechanism and (ii) a forward auction mechanism that both are designed to allocate the power cuts. These auctions are based on redistribution mechanisms and satisfy dominant strategy incentive compatibility and allocative efficiency. The mechanisms are weakly budget balanced and since they are based on redistribution mechanisms, they lead to reduced budget imbalance. We demonstrate the efficacy of these mechanisms for a typical scenario in Indian power grid operations and subsequently explore the relative performance of the mechanisms in a detailed simulation setting.