Optimal bidding strategies for competitive generators and large consumers

There exists the potential for gaming such as strategic bidding by particip ants (power suppliers and large consumers) in a deregulated power market, w hich is more an oligopoly than a laissez-faire market. Each participant can increase his or her own profit through strategic bidding but this has a ne gative effect on maximising social welfare. A method to build bidding strategies for both power suppliers and large con sumers in a poolco-type electricity market is presented in this paper. It i s assumed that each supplier/large consumer bids a linear supply/demand fun ction, and the system is dispatched to maximise social welfare. Each suppli er/large consumer chooses the coefficients in the linear supply/demand func tion to maximise benefits, subject to expectations about how rival particip ants will bid. The problem is formulated as a stochastic optimisation probl em, and solved by a Monte Carlo approach. A numerical example with six supp liers and two large consumers serves to illustrate the essential features o f the method. (C) 2000 Elsevier Science Ltd. All rights reserved.