A Distribution Market Clearing Mechanism for Renewable Generation Units With Zero Marginal Costs

A key feature of an electricity distribution market is that it may be dominated by renewable generation with zero marginal cost. Existing market mechanisms are likely to fail in this context since it cannot generate a reasonable price signal to compensate for the investment cost of renewable generators. Given this background, a double-sided auction market mechanism is presented for pricing the zero marginal cost renewable generation in the distribution system. Honesty is proved to be a dominant strategy for participants, which would enable the proposed mechanism to develop into a set-and-forget bidding market. The proposed market mechanism is also shown to be compatible with the nodal pricing system. Finally, case studies are carried out, and the results show that under the proposed market mechanism, the problem of always bidding a zero price by renewable generators in some existing markets can be avoided. Even when only renewable generation units with zero marginal costs participate in the bidding, the proposed mechanism can still produce a reasonable market clearing price. When adopting the average pricing market mechanism, merits of nodal pricing can still be retained and contribute to the enhancement of the operating efficiency of the distribution network.