Electricity Systems Group at ICL

Matteo has passed me a link to an article published on the NERA website (and originally published on Energy Risk), arguing the benefits of clock auctions as opposed to the standard request-for-proposal (RFP) process.

"Clock auctions offer benefits over the standard request-for-proposal (RFP) process for procuring electricity, says PSEG's Robinson. Under the RFP method, power suppliers submit sealed bids setting out the amount they wish to supply at a certain price. And even if a supplier's bid is successful, it might end up supplying power at a significantly lower price than another winning bidder.

By contrast, says Robinson, in an auction, bidders are informed of the going price; how much the price has ticked down from the previous round; and an approximate idea of how many tranches each utility needs to obtain (they are told a range of, say, 125 to 135 tranches). Hence suppliers can adjust their bids according to the level of excess supply. "

However, just like any other game, an auction mechanism is prone to manipulation by players seeking to maximize their utility. In the case of clock auctions electricity producers are happy because of the price transparency. So, is there anybody who stands to lose? What could be possible equilibria of the game? Has anybody got pointers?
Any feedback gratefully appreciated.