Lying generators: manipulability of centralized payoff mechanisms in electrical energy trade

Optimal power flow (OPF) problems are focussing on the question how a power transmission network can be operated in the most economic way. The general aim in such scenarios is to optimize generator scheduling in order to meet consumption requirements, transmission constraints and to minimize the overall generation cost and transmission losses. We use a simple lossless DC load flow model for the description of the transmission network, and assume linearly decreasing marginal cost of generators with different parameters for each generator. We consider a scenario in which the generation values regarding the OPF are calculated by a central authority who is aware of the network parameters and production characteristics. Furthermore, we assume that a central mechanism is applied for the determination of generator payoffs in order to cover their generation costs and assign them with some profit. We analyze the situation when generators may provide false information about their production parameters and thus manipulate the OPF computation in order to potentially increase their resulting profit. We consider two central payoff mechanisms and compare their vulnerability for such manipulations and analyze their effect on the total social cost.