Penalty mechanism in transactive energy: A mechanism design approach for day-ahead markets

Parrado-Duque, A., Henao, N., Kelouwani, S., Agbossou, K. et Oviedo-Cepeda, J. C. (2025). Penalty mechanism in transactive energy: A mechanism design approach for day-ahead markets. Energy Strategy Reviews, 59 . p. 101712. ISSN 2211-467X DOI 10.1016/j.esr.2025.101712

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Résumé

Ensuring incentive compatibility mechanisms to enforce market obligations is crucial in deploying a transactive energy system. While previous studies have reported adopting penalty mechanisms for market compliance, these studies did not generally analyse the incentive compatibility property of mechanism design. Neglecting this mechanism design property can lead to inefficient market outcomes and economic losses for system operators. This paper analyses self-enforcing policies to verify whether they comply with the incentive compatibility property in a one-shot market architecture. Additionally, it provides a comprehensive introduction to the phases of mechanism design – ex-ante, interim, and ex-post – and their relationship with key design principles: individual rationality, efficiency, budget balance, and incentive compatibility, highlighting expected outcomes at each phase. A case study demonstrates how a strategy-proof mechanism significantly influences individual rationality, efficiency, and budget balance, offering practical insights for improving decision-making frameworks in electricity markets. Moreover, the findings reveal that adopting a non-strategy-proof mechanism undermines the long-term viability of transactive energy systems. This work provides actionable recommendations for system operators and policymakers on implementing mechanisms that prevent strategic behaviour from agents.

Type de document:	Article
Mots-clés libres:	Agents Incentive compatibility Mechanism design Penalty mechanism Transactive energy
Date de dépôt:	20 août 2025 15:22
Dernière modification:	20 août 2025 15:22
URI:	https://depot-e.uqtr.ca/id/eprint/12209

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