Optimal generator bidding strategies for power and ancillary services using game theory
01 Sep 2008-pp 1-8
TL;DR: In this article, a simple method to derive strategic equilibrium solutions for a single Generating Company (GENCO) bidding in electricity markets is described. But this method computes the product mix of real power and the ancillary services of reactive power and spinning reserve supplied by GENCO.
Abstract: This paper describes a simple method to derive strategic equilibrium solutions for a single Generating Company (GENCO) bidding in electricity markets. This method computes the product mix of real power and the ancillary services of reactive power and spinning reserve supplied by GENCO. Generator capability curves are incorporated into a two-player competitive market model to simulate market auctions for real power and ancillary services. Player 1 is defined as the GENCO entering the auction and Player 2 is the equivalent representation of all other GENCOs competing in the auction. Game theory techniques are utilized to identify optimal Nash Equilibrium solutions for the power market auctions, which are optimal bidding strategies for the competing players. Software was developed to automatically simulate the market auction and identify equilibrium solutions from a defined combination of bidding strategies. Simulations demonstrate that the computed equilibrium solution optimizes the GENCO's payoff.
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TL;DR: In this article, a theoretical equilibrium model for energy and reserve markets is also proposed, focusing on reserve types and dispatching methods, and discusses different approaches to model them, such as more competitive or more oligopolistic.
103 citations
TL;DR: In this article, the authors present a bidding strategy based on an optimization approach for deriving an optimal bid and for estimating the revenue potential on this market, where the focus is on the participation of battery energy storage systems (BESS) either in standalone mode or in conjunction with a virtual power plant (VPP).
47 citations
TL;DR: In this paper, an active-reactive power dispatch procedure is proposed via a bilevel optimization problem whose upper and lower level criteria are, respectively, the minimum opportunity cost and minimum offered price of active power.
Abstract: This paper proposes an active-reactive power dispatch procedure that is expressed via a bilevel optimization problem whose upper and lower level criteria are, respectively, the minimum opportunity cost and minimum offered price of active power. It analyzes the impact of minimizing such criteria on system operation, and it investigates the behavior of marginal prices and opportunity costs and their use in mechanisms to compensate generators for power provision. The bilevel problem is solved using a version of interior point methods derived for mathematical programs with complementarity constraints. Results obtained with three test systems are analyzed.
31 citations
TL;DR: In this paper, the authors proposed a new methodology to obtain an optimized real bidding curve for the secondary (spinning) reserve market, based on the maximization of a company profit, assuming a set of residual demand curves scenarios for its competitors' representation, and considering the day-ahead market opportunity cost to build the reserve cost curve.
Abstract: Electricity markets are based on several sequential energy and reserve trading mechanisms to constantly maintain the balance between generation and demand. During the last years, reserve markets are getting much importance all around the world with the increasing social awareness of the renewable energy benefits. Additional reserve quantities and larger remunerations are being implemented by the regulators since this renewable energy is highly dependent on weather conditions uncertainties. Utilities are therefore demanding more and more powerful models to better optimize their reserve bidding curves to be sent to the system operators. This paper describes a new methodology to obtain an optimized real bidding curve for the secondary (spinning) reserve market. The approach is based on the maximization of a company profit, assuming a set of residual demand curves scenarios for its competitors' representation, and considering the day-ahead market opportunity cost to build the reserve cost curve. The case study validates the main features of the proposed methodology by its application to the Spanish secondary reserve market. This methodology is being daily used by one of the most important electricity companies in Spain.
25 citations
27 May 2013
TL;DR: An agent-based simulator for examination of a secondary control market dominated by hydro power producer as decision support for one of the market participants is presented and a Q-learning algorithm for determining possible strategic behavior is proposed.
Abstract: This paper presents an agent-based simulator for examination of a secondary control market dominated by hydro power producer as decision support for one of the market participants. Proposed is a Q-learning algorithm for determining possible strategic behavior. Adaptive learning is made possible by application of certain characteristics to agents quantity-price pairs bids. Considered are for each agent its portfolio of different hydro power plants with their water values estimated by a stochastic dynamic programming scheme. The simulator is applied to the Swiss system where strategic behavior will be shown. Additionally it is analyzed how single agents could make use of strategic behavior in case of special occurrences in the market.
5 citations
References
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16 Jul 2000
TL;DR: In this paper, the authors present a literature survey based on more than 30 research publications on the subject of strategic bidding in competitive electricity markets, and present a set of market management rules.
Abstract: Participants in a competitive electricity market develop bidding strategies in order to maximize their own profits. On the other hand, it is necessary for regulators to investigate strategic bidding behavior in order to identify possible market power abuse and to limit such abuse by introducing appropriate market management rules. An interesting body of work has been done on this subject, and this paper presents a literature survey based on more than 30 research publications.
370 citations
TL;DR: In this article, the problem of pricing electricity in deregulated marketplaces is modeled as a non-cooperative game with incomplete information, and solved using the Nash equilibrium idea, where each pool participant knows its own operation costs but does not know his opponents' operation costs.
Abstract: The authors present a game theory approach to the problem of pricing electricity in deregulated marketplaces. They assume that an independent operator receives bids by pool participants and defines transactions among participants by looking for the minimum price that satisfies the demand in the pool. The competition among pool participants is modeled as a noncooperative game with incomplete information. They assume that each pool participant knows its own operation costs but does not know his opponents' operation costs. The game, with incomplete information, is transformed into a game with complete, but imperfect, information and solved using the Nash equilibrium idea. The approach presented in this paper is geared towards providing support for pricing electricity in deregulated pools.
182 citations
TL;DR: In this article, a Prisoner's dilemma matrix game and the notion of opportunistic tacit collision were proposed to explain strategic bidding behaviors in which suppliers withhold generation capacity from the market to drive up prices.
Abstract: Many challenging issues arise under the newly deregulated competitive electric power markets. Instead of centralized decision-making in a vertically integrated environment as in the past, decision-making is now decentralized and driven by market forces. Gaming and price spikes have been observed in almost every electricity market but explicit analysis of these phenomena is rare. In this paper, the authors study historical bidding behavior to see how power suppliers and demand service providers were actually bidding in the California day-ahead energy market. Based on their observations, they formulate a Prisoner's dilemma matrix game and introduce the notion of "opportunistic tacit collision" to explain strategic bidding behaviors in which suppliers withhold generation capacity from the market to drive up prices. This explanation is applicable with or without market power, transmission constraints, and insufficient supply, and is only enhanced by these factors. Their analysis is generally applicable to any uniform price electricity market in which there is significant insensitivity to price on the demand side.
111 citations
TL;DR: The author presents an introduction to game theory as well as its application to electric power market allocation problems as a generalization of decision theory.
Abstract: Game theory is a discipline that is used to analyze problems of conflict among interacting decision makers. It may be considered as a generalization of decision theory to include multiple players or decision makers. Here, the author presents an introduction to game theory as well as its application to electric power market allocation problems.
96 citations
TL;DR: In this paper, the authors conducted MVAr capability range tests on all the synchronous generators comprising the Ohio Edison System and found that operating the generators within limited MVAr ranges masked other problems.
Abstract: In the late 1980s, a variation in system characteristics in the Upper Ohio Valley resulted in changes in system performance. When the changes in system performance varied to a sufficient extent, the utilities in the upper Ohio Valley decided to perform a voltage coordination study. One facet of this study consisted of conducting MVAr capability range tests on all the synchronous generators comprising the Ohio Edison System. This study produced some interesting results relating to the validity of the synchronous generator capability curves supplied by the manufacturers as well as operating practices in the plants themselves. Operating the synchronous generators within limited MVAr ranges masked other problems which were not discovered until the synchronous generator MVAr capability range tests were performed. >
68 citations