Learning from Past Bids to Participate Strategically in Day-Ahead Electricity Markets

arXiv1811.06113MaRDI QIDQ6309751FDOQ6309751

Authors: Ruidi Chen, Ioannis Ch. Paschalidis, Michael Caramanis, Panagiotis Andrianesis 

Publication date: 14 November 2018

Abstract: We consider the process of bidding by electricity suppliers in a day-ahead market context where each supplier bids a linear non-decreasing function of her generating capacity with the goal of maximizing her individual profit given other competing suppliers' bids. Based on the submitted bids, the market operator schedules suppliers to meet demand during each hour and determines hourly market clearing prices. Eventually, this game-theoretic process reaches a Nash equilibrium when no supplier is motivated to modify her bid. However, solving the individual profit maximization problem requires information of rivals' bids, which are typically not available. To address this issue, we develop an inverse optimization approach for estimating rivals' production cost functions given historical market clearing prices and production levels. We then use these functions to bid strategically and compute Nash equilibrium bids. We present numerical experiments illustrating our methodology, showing good agreement between bids based on the estimated production cost functions with the bids based on the true cost functions. We discuss an extension of our approach that takes into account network congestion resulting in location-dependent prices.

This page was built for publication: Learning from Past Bids to Participate Strategically in Day-Ahead Electricity Markets

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q6309751)