Designs for ramp-constrained day-ahead auctions

Some electric power markets allow bidders to specify constraints on ramp rates for increasing or decreasing power production. We show in a small example that a bidder could use an overly restrictive constraint to increase profits, and explore the cause by visualizing the feasible region from the linear program corresponding to the power auction. We propose two penalty approaches to discourage bidders from such a tactic: one based on duality theory of linear programming, the other based on social cost differences caused by ramp constraints. We evaluate the two approaches using a simplified scaled model of the California power system, with actual 2001 California demand data.