Strategic bidding for electricity supply in a day-ahead energy market

The problem of building optimal bidding strategies for competitive supplier s in a day-ahead energy market is addressed in this paper. It is assumed th at each supplier bids 24 linear energy supply functions, one for each hour, into the day-ahead energy market, and the market is cleared separately and simultaneously for all the delivery hours. Each supplier makes decisions o n unit commitment and chooses the coefficients in the linear energy supply functions to maximize total benefits in the schedule day, subject to expect ations about how rival suppliers will bid. Two different bidding schemes, n amely 'maximum hourly-benefit bidding strategies' and 'minimum stable outpu t bidding strategies', have been suggested for each hour, and based on thes e two schemes an overall bidding strategy in the day-ahead market can then be developed. Stochastic optimization models are first developed to describ e these two different bidding schemes and a genetic algorithm based method is then presented to develop an overall bidding strategy for the day-ahead market. A numerical example is utilized to illustrate the essential feature s of the method. (C) 2001 Published by Elsevier Science B.V.