Optimal electricity supply bidding by Markov decision process

The bidding decision making problem is studied from a supplier's viewpoint in a spot market environment. The decision-making problem is formulated as a Markov Decision Process - a discrete stochastic optimization method All o ther suppliers are modeled by their bidding parameters with corresponding p robabilities. A systematic method is developed to calculate transition prob abilities and rewards. A simplified market clearing system is also included in the implementation. A risk-neutral decision-maker is assumed, the optim al strategy is calculated to maximize the expected reward over a planning h orizon. Simulation cases are used to illustrate the proposed method.