Inefficiencies and cross-subsidies in pool-based electric energy markets

This paper analyzes a single-period auction-based algorithm used to clear a pool-based electric energy market. This analysis is made in terms of economic efficiency of the solutions attained, and in terms of cross-subsidies among generators and demands. A single-period auction-based algorithm neglects inter-temporal constraints of the generators and network constraints, so additional algorithms are needed to take these conditions into account provoking inefficiencies and cross-subsidies. This paper clearly shows the cost of using an overly simple procedure such as a single-period auction-based algorithm and proposes a more efficient procedure, a multi-period market clearing algorithm, that takes properly into account technical constraints of generators and network constraints