Indirect Mechanism Design for Efficient and Stable Renewable Energy Aggregation

Mechanism design is studied for aggregating renewable power producers (RPPs) in a two-settlement power market. Employing an indirect mechanism design framework, a payoff allocation mechanism is derived from the competitive equilibrium of an especially formulated market with transferrable payoff. Given the designed mechanism, the strategic behaviors of the participating RPPs entail a non-cooperative game: It is proven that a unique pure Nash equilibrium exists among the RPPs, for which a closed-form expression is found. Moreover, it is proven that the designed mechanism achieves a number of key desirable properties at the NE: these include efficiency (i.e., an ideal 'Price of Anarchy' of one), stability (i.e., 'in the core' from a coalitional game theoretic perspective), and no collusion. In addition, it is shown that a set of desirable 'ex-post' properties are also achieved by the designed mechanism. Extensive simulations are conducted and corroborate the theoretical results.