  We consider a two-stage market mechanism for trading electricity including
renewable generation as an alternative to the widely used multi-settlement
market structure. The two-stage market structure allows for recourse decisions
by the market operator, which are not possible in today's markets. We allow for
different conventional generation cost curves in the forward and the real-time
stages. We have considered costs of demand response programs and black outs,
and adopt a DC power flow model to account for network constraints. Our first
result is to show existence (by construction) of a sequential competitive
equilibrium (SCEq) in such a two-stage market. We argue social welfare
properties of such an SCEq, and then design a market mechanism that achieves
social welfare maximization when the market participants are non-strategic. We
also show that under either a congestion-free or a monopoly-free condition, an
efficient Nash equilibrium exists.
