Strategic bidding for wind power producers in electricity markets

•Game theoretic bidding strategy approach developed to optimize wind power producers bids.•Rival behavior modeled through Stochastic Cournot model.•Location based dual imbalance price mechanism proposed to obtain imbalance charges.•Proposed approach evaluated using two realistic case studies.•Propos...

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Bibliographic Details
Published in:Energy conversion and management 2014-10, Vol.86, p.259-267
Main Authors: Sharma, Kailash Chand, Bhakar, Rohit, Tiwari, H.P.
Format: Article
Language:English
Subjects:
Applied sciences
Automotive engineering
Electric power generation
Electricity
Electricity markets
Energy
Exact sciences and technology
Markets
Nash equilibrium
Natural energy
Stochastic Cournot model
Strategy
Uncertainty
Wind energy
Wind power
Wind power generation
Wind power uncertainty
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Summary:•Game theoretic bidding strategy approach developed to optimize wind power producers bids.•Rival behavior modeled through Stochastic Cournot model.•Location based dual imbalance price mechanism proposed to obtain imbalance charges.•Proposed approach evaluated using two realistic case studies.•Proposed approach increases profit of strategic wind power producers significantly. In evolving electricity markets, wind power producers (WPPs) would increase their profit through strategic bidding. However, generated power by WPPs is highly random, which may result into heavy imbalance charges. In markets dominated by wind generators, they would optimize their offered bids, considering rival behavior. In oligopolistic day-ahead electricity markets, this strategic behavior can be represented as a Stochastic Cournot model. Wind uncertainty is represented by scenarios generated using Auto Regressive Moving Average (ARMA) model. With a consideration of wind power uncertainty and imbalance charges, strategic WPPs can maximize their expected payoff or profit through the proposed Nash equilibrium based bidding strategy. Nash equilibrium is obtained using payoff matrix approach. Proposed approach is evaluated on two realistic case studies considering different technical constraints. Obtained results shows that proposed bidding strategy mechanism offers quantum increase in profit for WPPs, when their behavior is modeled in a game theoretic framework. Flexibility of approach offers opportunities for its extension to associated challenges.
ISSN:0196-8904
1879-2227
DOI:10.1016/j.enconman.2014.05.002