| As the electric power industry transitions to a deregulated market, power transactions are made upon price rather than cost. Generator companies are interested in maximizing their profits rather than overall system efficiency. A method to equitably compensate generation providers for real power, and ancillary services such as reactive power and spinning reserve, will ensure a competitive market with an adequate number of suppliers. Optimizing the generation product mix during bidding is necessary to maximize a generator company's profits.; The objective of this research work is to determine and formulate appropriate optimal bidding strategies for a generation company in both the energy and ancillary services markets. These strategies should incorporate the capability curves of their generators as constraints to define the optimal product mix and price offered in the day-ahead and real time spot markets.; In order to achieve such a goal, a two-player model was composed to simulate market auctions for power generation. A dynamic game methodology was developed to identify Nash Equilibria and Mixed-Strategy Nash Equilibria solutions as optimal generation bidding strategies for two-player non-cooperative variable-sum matrix games with incomplete information. These games integrated the generation product mix of real power, reactive power, and spinning reserve with the generators's capability curves as constraints. The research includes simulations of market auctions, where strategies were tested for generators with different unit constraints, costs, types of competitors, strategies, and demand levels.; Studies on the capability of large hydrogen cooled synchronous generators were utilized to derive useful equations that define the exact shape of the capability curve from the intersections of the arcs defined by the centers and radial vectors of the rotor, stator, and steady-state stability limits. The available reactive reserve and spinning reserve were calculated given a generator operating point in the P-Q plane.; Four computer programs were developed to automatically perform the market auction simulations using the equal incremental cost rule. The software calculates the payoffs for the two competing competitors, dispatches six generators, and allocates ancillary services for 64 combinations of bidding strategies, three levels of system demand, and three different types of competitors. Matrix Game theory was utilized to calculate Nash Equilibrium solutions and mixed-strategy Nash solutions as the optimal generator bidding strategies.; A method to incorporate ancillary services into the generation bidding strategy, to assure an adequate supply of ancillary services, and to allocate these necessary resources to the on-line units was devised. The optimal generator bid strategy in a power auction was shown to be the Nash Equilibrium solution found in two-player variable-sum matrix games. |
