Optimal bidding strategy in a competitive electricity market based on agent-based approach and numerical sensitivity analysis

The objective of this study is to present a new method for determination of the optimal bidding strategies among generating companies (GenCo) in the electricity markets using agent-based approach and numerical sensitivity analysis (NSA). While agent-based approach provides for decision making, NSA can help with identifying the critical control points that lead to proper decisions to be taken by GenCos. To achieve the objective, the pricing mechanism used for settling the electricity market and determining the GenCos rewards is locational marginal pricing (LMP) and the sensitivity of each GenCo reward with respect to its bid is analyzed, then, the optimal strategy is determined. An example and a case study are used to illustrate the efficiency of the proposed method. The LMPs and allocated generations of GenCos show that the proposed method leads GenCos to learn a strategic manner and, as a result, increase prices and maximize their rewards. To validate the proposed method, the results from this study are compared with those available in the literature. The comparison of results shows an improved simulation time by 8.16 percent and total reward of market by 2.46 percent.

► A new method for determination of the optimal bidding strategies is presented.
►  Agent-based approach and numerical sensitivity analysis are used.
► Proposed method leads GenCos to learn a strategic manner and maximize their rewards.
► Results show improved simulation time and total reward of market.