Competitive Market with Renewable Power Producers Achieves Asymptotic Social Efficiency

A price-making two-settlement power market in which both conventional generators and renewable power producers (RPPs) participate is studied. It is proved that the Nash Equilibrium (NE) of the market converges to the social optimum as the number of RPPs increases. As a result, social efficiency is asymptotically achieved with a simple market mechanism for integrating RPPs, without the need for an independent system operator (ISO) to perform a centralized stochastic optimization. The analytical derivation of the NE offers an elegant characterization of the market power of the competitive RPPs. The market outcomes predicted by the developed theoretical results are demonstrated by simulation studies.