Increasing the resilience of electricity networks: Auctioning of priority supply to minimize outage costs

This article presents an approach to minimize outage costs during power supply disruptions and, thus, to incentivize efficient resilience investment by network users. It serves as an initial contribution to creating incentives for greater resilience in the energy system. The central problem to be solved is the information asymmetry between network operators and network users in terms of outage and backup costs. We present an auction of priority positions among network users by applying the Vickrey-Clarke-Groves mechanism, using a numerical example, to solve this problem. Priority positions imply an externality: the priority of one user means that others are reconnected later and incur higher costs. Under this mechanism, each winning bidder pays for the externality exerted on the other bidders by holding a certain position, excluding one’s own bid, which induces truthful bidding. By minimizing the damage from power supply interruptions, the mechanism improves the resilience of the power system not only in the short term but also in the long term.