Pricing when market optimization has multiple dual solutions

Abstract

A clearing price is directly obtained from the dual solution of market optimization in standard pricing. However, multiple dual solutions may exist in such a market optimization. Multiple clearing prices may thus occur. In this case, choosing a unique clearing price becomes a problem. On the other hand, market operation requires a proper clearing price. This paper first elucidates this problem in mathematical expression, then narrows down the interval of reasonable clearing price. Based on a social welfare analysis, a new method is proposed to set a clearing price. An example is described for testing the suggested pricing method. Discussion and conclusion are also provided. Results demonstrate that this method has sound basis and fast computation traits.