Research On The Mechanism Of Strategic Bidding For Generation Companies In Electricity Markets

Electricity markets have been becoming fashionable around the world in the last 20 years. The emerging electricity markets are not perfectly competitive due to special features, such as large investment size (barrier to entry) and economy of scale in the generation sector, and therefore more akin to oligopoly. In oligopolistic electricity markets, generation companies (Gencos) could exercise strategic bidding to maximize their own profits. With the development of power industry restructuring around the globe, the investigation on this strategic bidding behavior is one of the most important issues in electricity market, and has attracted much attention from people in the academic circle, generation companies, business decision organizations as well as regulatory entities. We research the strategic behavior from different point of view for generation and market governor in a generation side market with sealed auction, and the main achievements contained in this dissertation are as follows:1. New frameworks are developed for building optimal bidding strategies with risks taken into account for competitive generation companies participating in a pool based single buyer type electricity market. With both considerations to maximize profits and at the same time to minimize risks incurred, two methods including mean-variation based model and value of risk in financial theory based model are developed, and two algorithms including mix intelligent based and directly optimal based are presented to develop risk constrained optimal bidding strategies, and impacts of different risk aversion coefficients and contract for difference (CFD) covering rates on profits and risks associated are analyzed and reasonable results obtained.2. Research on risk-constrained optimal bidding strategies for Gencos participating in a day-ahead electricity market with multiple trading periods in which CFD is enforced, The problem is formulated as a stochastic optimization model with operating constraints of generating units like ramp rates and minimum permitted startup and shutdown hours well taken into account , and solved by a genetic algorithm based method. A numerical example is finally served for demonstrating the developed model and method.3. Transmission capacity constraints (TCC) must be taken into account when Gencos develop their optimal bidding strategies. In sealed auction based electricity markets, their optimal bidding strategies can be developed with two levels stochastic optimal programming. For the case of no transmission capacity constraints, an effi-cient optimization method has already been developed for solving this problem. While for the case with transmission capacity constraints taken into account, the problem is much more complicated and difficult, and up to now efficient optimization methods has not yet been developed. As a result, the Monte Carlo simulation approach has been employed for this purpose but with very poor computational efficiency. Given this background, the problem of building an optimal bidding strategy for a generation company is investigated in this paper with TCC taken into consideration, and an efficient complementary optimization method developed. The essential characteristic of the developed method lies in that linear equation sets are solved rather than the time-consuming Monte Carlo simulation process carried out, and in this way, the computational efficiency is greatly improved. Finally, the IEEE 30-bus test system is served for demonstrating the feasibility and efficiency of the developed method.4. Tacit collusion is a serious strategic bidding behavior in electricity market.The infinitely repeated auctions in electricity markets facilitate the forming of tacit collusions among generation companies which certainly have negative effects on the normal and efficient operation of electricity markets. In the framework of infinitely repeated non-cooperative game theory under complete information, an effort is made for examining the mechanism of tacit collusions among generation companies in this paper. A single-period static gaming model is first developed for two symmetrical generation companies in an electricity market with the market clearing price (MCP) employed for settlement, and the existence of a Nash equilibrium state is proved. On this basis, the mechanism of the tacit collusion among two generation companies in infinitely repeated auctions is next investigated with cyclical demand fluctuations taken into consideration, and a sufficient as well as necessary condition is obtained concerning the sustainability of a tacit collusion equilibrium state. The relationships between the sustainability of the tacit collusion and generation installed capacities of generation companies as well as the cyclical load fluctuations are analyzed through both theoretical and numerical studies, and the impacts of linear and quadratic production cost functions on the tacit collusion equilibrium state examined.