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 very 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.