Incentive based energy market design

Current energy market designs and pricing schemes fail to give investors the appropriate market signals. In particular, energy prices are not high enough to attract investors to build new or maintain existing power capacity. In this paper we propose a method to compute second‐best Pareto optimal equilibrium prices for any market exhibiting non‐convexities and, based on this result, an energy market design able to restore the correct energy price signals for supply investors.