  Although the specific structures of electricity markets are diverse around
the world, they were all conceived on the premise of predictable, controllable
generation with nonnegligible marginal costs. Recent changes, specifically, the
increasing renewable integration, have challenged such assumptions. In light of
this shift, this thesis intends to devise new frameworks and advance our
understanding of the future markets. The first part focuses on mechanism design
when the model fully reflects the physics of the grid and the participants. We
consider a market that involves continuous goods, general nonconvex
constraints, and second stage costs. We then design the payments and conditions
under which coalitions cannot influence the outcome. Under the
incentive-compatible VCG mechanism, we prove that coalition-proof outcomes are
achieved if bids are convex and constraints are polymatroids. By relaxing
incentive-compatibility, we investigate core-selecting mechanisms that are
coalition-proof without conditions. We show that they generalize the economic
rationale of the LMP mechanism, and can approximate truthfulness without the
price-taking assumption. Finally, they are budget-balanced. The second part
coordinates regional markets to exploit the geographic diversification of
renewables. In Europe, reserves remain an exclusive responsibility of regional
operators. This limited coordination and the sequential structure hinder the
utilization of generation and transmission. To promote reserve exchange, a
preemptive model can optimally withdraw inter-area transmission capacity from
day-ahead energy for reserves. This bilevel program however does not suggest
costs that guarantee coordination. We formulate a new preemptive model that
allows us to obtain stable benefits immune to deviations. Our proposal,
least-core benefits, achieves minimal stability violation with a tractable
computation.
