An Incentive Compatible Profit Allocation Mechanism for Renewable Energy Aggregation

Problem setting: In a market environment, each renewable power producers (RPP) is asked to submit some (specifically designed) information. Then based on the received information, the aggregator makes some decision. Finally, the reward of the aggregator needs to be distributed among the members such that

• The RPPs are incentivized to submit the truthful information to the aggregator.
• The decision making procedure that the aggregator follows ensures optimality of the outcome for the aggregator.
• Each RPP receives at least the same payoff as it would get if it participated in the market without the aggregator.
• budget balance

Method: To ensure individual rationality, we first allocate the amount of payment that each RPP would get if it participated in the market separately. We then distribute the excess payoff of the aggregator based on the realizations of the RPPs. It turns out that this simple payoff mechanism achieves all the desired propertirs listed above.

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