An evolutionary game approach to analyzing bidding strategies in electricity markets with elastic demand

In this paper we propose an evolutionary imperfect information game approach to analyzing bidding strategies in electricity markets with price-elastic demand. In previous research, opponent generation companies’ (GENCOs’) bidding strategies were assumed to be fixed or subject to a fixed probability...

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Bibliographic Details
Published in:Energy (Oxford) 2011, Vol.36 (5), p.3459-3467
Main Authors: Wang, Jianhui, Zhou, Zhi, Botterud, Audun
Format: Article
Language:English
Subjects:
Agent based-modeling
algorithms
Applied sciences
Bidding strategies
business enterprises
Coevolutionary algorithm
Economic data
Electric energy
electricity
Energy
Energy economics
Evolutionary game
Exact sciences and technology
Game theory
General, economic and professional studies
markets
Methodology. Modelling
probability distribution
Strategy selection
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Summary:In this paper we propose an evolutionary imperfect information game approach to analyzing bidding strategies in electricity markets with price-elastic demand. In previous research, opponent generation companies’ (GENCOs’) bidding strategies were assumed to be fixed or subject to a fixed probability distribution. In contrast, the adaptive and learning agents in the presented model can dynamically update their beliefs about opponents’ bidding strategies during the simulation. GENCOs are represented as different species in the coevolutionary algorithm to search the equilibrium. By modeling the evolutionary gaming behavior of GENCOs, the simulation can capture the dynamics of GENCOs’ strategy change. This is important for analyzing transitory behavior of agents in the market in addition to the long-run equilibrium state. Simulations show that due to the adaptive learning, the bidding evolution is different from the one in the traditional game. ► This paper models the transition of GENCOs beliefs of their opponents’ strategies, which is a natural representation of interactions in real-world markets. ► By using the coevolutionary game approach, this paper models the GENCOs’ dynamic and adaptive behavior to meet an elastic demand. ► This paper investigates the equilibrium of the power market with various demand, supply, and transmission network topology settings.
ISSN:0360-5442
DOI:10.1016/j.energy.2011.03.050