Spot market mechanism design and competitivity issues in electric power

Continuing previous research on market power issues in electricity markets, the authors report new experiments which compare the sealed bid offer (SBO) market mechanism, studied by Backerman et al. (1997), with a uniform price double auction mechanism (UPDA) that updates nodal prices and allocations continuously as new bids and offers arrive in real time down to the close when the market is “called” and all standing accepted bids and offers become binding spot contracts. They compare the performance of the SBO and UPDA institutions in terms of their impact on incentives affecting market efficiency (the ability to exhaust the gains from exchange), generator and wholesale buyer profitability, and delivery price. Under each of the two trading institutions they compare markets in which the available generator capacities and their costs are held by three versus six independent companies