Optimal contract design for energy procurement

Author

Tavafoghi, Hamidreza ; Teneketzis, Demosthenis

Author_Institution

Dept. of Electr. Eng. & Comput. Sci., Univ. of Michigan, Ann Arbor, MI, USA

fYear

2014

fDate

Sept. 30 2014-Oct. 3 2014

Firstpage

62

Lastpage

69

Abstract

We consider a mechanism design problem for strategic agents with multi-dimensional private information and uncertainty in their utility/cost functions. We show that the optimal mechanism is a menu of contracts that can be implemented as a nonlinear pricing scheme. We illustrate the result by considering an optimal energy procurement mechanism from a strategic seller with conventional (deterministic) and renewable (random) plants. We address the problem of risk-sharing and ex-post voluntary participation (commitment) under uncertainty.

Keywords

contracts; power markets; procurement; electricity markets; mechanism design problem; multidimensional private information; optimal contract design; optimal energy procurement mechanism; optimal mechanism; strategic agents; utility-cost functions; Contracts; Cost function; Electricity supply industry; Pricing; Procurement; Production; Uncertainty; contract under uncertainty; mechanism design; multidimensional private information; renewable energy;

fLanguage

English

Publisher

ieee

Conference_Titel

Communication, Control, and Computing (Allerton), 2014 52nd Annual Allerton Conference on

Conference_Location

Monticello, IL

Type

conf

DOI

10.1109/ALLERTON.2014.7028436

Filename

7028436