Optimal Offer Construction in Electricity Markets

In this paper we study strategies for generators making offers into electricity markets in circumstances where both the demand for electricity and the behaviour of competing generators is unknown but can be represented by a probability distribution. Given this probability distribution, we derive nec...

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Bibliographic Details
Published in:Mathematics of operations research 2002-02, Vol.27 (1), p.82-100
Main Authors: Anderson, E. J, Philpott, A. B
Format: Article
Language:English
Subjects:
Curves
Distribution functions
Dynamic programming
Electric generators
Electric power production
Electricity
Electricity distribution
Electricity markets
Expected returns
Line integrals
Market prices
Necessary conditions for optimality
Optimal solutions
Optimization
Studies
Supply
supply functions
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Summary:In this paper we study strategies for generators making offers into electricity markets in circumstances where both the demand for electricity and the behaviour of competing generators is unknown but can be represented by a probability distribution. Given this probability distribution, we derive necessary optimality conditions for a broad class of supply offer curves. We show how these conditions can be used to construct an optimal solution for a simple example. We also consider the case in which a generator is restricted in the number of prices at which power can be offered.
ISSN:0364-765X
1526-5471
DOI:10.1287/moor.27.1.82.338