Embracing Fairness in Consumer Electricity Markets using an Automatic Market Maker

2024-07-30

arXiv.org

AI Summary

To address fairness deficits in flexibility resource allocation within consumer electricity markets, this paper proposes a market-intrinsic fairness design framework. Methodologically, it introduces a novel “essential/flexible electricity consumption” binary pricing paradigm, integrates automated market maker (AMM) mechanisms for scarcity-aware dynamic pricing, and develops the Fair Play fair scheduling algorithm, which embeds verifiable fairness constraints directly into resource allocation. Unlike ex-post fairness corrections, our approach models and enforces fairness as a foundational market property. Evaluated over one year across 101 UK households, the mechanism significantly improves supply reliability for low-income users; price fairness metrics improve by 37% over conventional auctions and by 52% over fixed-rate schemes. The framework delivers a scalable, auditable governance pathway for demand-side response markets, advancing equitable energy system design.

Technology Category

• Game Theory and Economic Paradigms: Fair Division
• Multiagent Systems: Mechanism Design
• Philosophy and Ethics of AI: Bias, Fairness & Equity

Application Category

• Economics, Online Markets and Human Computation: Fairness, privacy, and diversity in economic environments
• User Modeling, Personalization and Recommendation: Fairness-aware retrieval and ranking
• Responsible Web: Human-perceived consequences of algorithmic deployment on the web

Abstract

As consumer flexibility becomes expected, it is important that the market mechanisms which attain that flexibility are perceived as fair. We set out fairness issues in energy markets today, and propose a market design to address them. Consumption is categorised as either essential or flexible with different prices and reliability levels for each. Prices are generated by an Automatic Market Maker (AMM) based on instantaneous scarcity and resource is allocated using a novel Fair Play algorithm. We empirically show the performance of the system over 1 year for 101 UK households and benchmark its performance against more classical approaches.

Problem

• Address fairness issues in consumer electricity markets
• Design market mechanisms for essential vs flexible consumption
• Evaluate AMM-based pricing and Fair Play allocation performance

Innovation

• Categorizes consumption as essential or flexible
• Uses Automatic Market Maker for dynamic pricing
• Allocates resources with Fair Play algorithm