On Walrasian Equilibrium for Pool-Based Electricity Markets

We present a single time period decentralized electricity market clearing model that includes reactive power and demand responsiveness in addition to the more common framework of generation-side competition for the real power commodity. The approach allows self-interested agents, namely producers and consumers, independently to maximize their individual surpluses subject to prices. This is consistent with the notion of a competitive market as defined in equilibrium theory. An auctioneer computes equilibrium prices that achieve power balance at every network node, as required by Kirchhoff´s laws. The overall scheme is justified by duality theory, for which there is a rich theoretical support, and convergence is achieved using a Newton price-updating algorithm.