Efficient Scoring-Rule in Multipart Procurement Auctions for Power Systems Reserve

In this paper, scoring-rules are analyzed based on the German markets for procuring power system reserves. For paying accepted offers, the pay-as-bid settlement-rule is applied. Each offer consists of a reserve capacity and two prices. The capacity price is for holding the capacity in reserve and the energy price is for delivery in case of actual use. A scoring-rule is applied to value the two-part price bids. Today, this scoring-rule is based on procuring the offers in the rank order of the capacity prices. A first analysis of historic price data indicates efficiency problems due to this scoring-rule. This leads to proposing to value the two-part price bids based on the ex post knowledge of the actual use of the procured reserves. It is shown that in contrast to today's scoring-rule, this duration curve approach gives incentives to reveal the variable generation costs in the energy price bids.