Cyber-Physical Systems Design: Electricity Markets

Abstract:

Working with the thesis committee members, Prof. Demosthenis Teneketzis (chair), Prof. Paul Milgrom (Stanford Economics), Prof. William Hogan (Harvard Kennedy School), and Prof. Asuman Ozdaglard (MIT EECS), we study the crucial and multi-disciplinary problem of designing markets for sustainable, reliable and price-efficient electricity (implementing electricity policy targets). We design efficient spot, carbon and capacity markets by developing a framework of designing markets with complex constraints that consists of two parts: auctions with constraints (for addressing policy targets) and networked markets (for addressing power flow constraints due to Kirchhoff's laws). Our design sheds light on major debates including carbon market vs carbon tax, energy-and-capacity vs energy-only solutions, and use of price/offer caps.

Our study of electricity markets is an example of the larger topic of cyber-physical systems design (CPS design). CPS design is challenging and requires interdisciplinary studies of engineering and economics because of the presence of strategic decision makers, complex physical constraints, and large-scale networked system.