Optimal bidding strategies for generation companies with network congestion taken into account

Abstract

In the electricity market environment, generation dispatch is bid-based rather than cost-based, and hence it has become a major concern for generation companies of how to build optimal bidding strategies. The deficiency of transmission capacity could lead to congestion, and as a result, the whole electricity market can then be actually divided into two or more submarkets. A direct consequence of transmission congestion is the change of competitive positions of generation companies concerned in the electricity market, and the optimal bidding strategies of them should accordingly be changed. In this work, the problem of developing optimal bidding strategies for generation companies in the electricity market environment with transmission network congestion taken into account is investigated, and a stochastic optimization model is first formulated under the presumption that the bidding behaviors of rival generation companies can be modeled as normal probability distributions. An approach is next presented for solving the optimization problem using the well-known Monte Carlo simulation method and the genetic algorithm. Finally, the modified IEEE 14-bus system is employed to illustrate the essential features of the proposed model and method.