Auction Mechanism Design in Wholesale Electricity Market Considering Impacts of Long-term Contract

In wholesale electricity market, a generator with cost information advantage will submit a bid higher than its true cost, which may reduce the market efficiency. To solve this problem, this article designs an incentive auction mechanism considering the impacts of long-term contract and the variability of marginal cost. The new mechanism includes an extra payment (information compensation) that will make generators submit their true marginal cost, and thus, achieves distribution efficiency. Then, it makes a demonstration based on the data from IEEE-RTS96. The result shows that the new mechanism can control the market power of generator and avoid strategic bidding behaviors.