  We investigate the problem of market mechanism design for wind energy. We
consider a dynamic two-step model with one strategic seller with wind
generation and one buyer, who trade energy through a mechanism determined by a
designer. The seller has private information about his technology and wind
condition, which he learns dynamically over time. We consider (static) forward
and real-time mechanisms that take place at time T=1 and T=2, respectively. We
also propose a dynamic mechanism that provides a coupling between the outcomes
of the forward and real-time markets. We show that the dynamic mechanism
outperforms the forward and real-time mechanisms for a general objective of the
designer. Therefore, we demonstrate the advantage of adopting dynamic market
mechanisms over static market mechanisms for wind energy. The dynamic mechanism
reveals information about wind generation in advance, and also provides
flexibility for incorporation of new information arriving over time. We discuss
how our results generalize to environments with many strategic sellers. We also
study two variants of the dynamic mechanism that guarantee no penalty risk for
the seller, and/or monitor the wind condition. We illustrate our results with a
numerical example.
