Strategic Bidding and Risk Assessment Using Genetic Algorithm in Electricity Markets

Abstract

In an electricity market, suppliers are more concerned with maximizing their profit and minimizing the financial risk, which can be achieved through strategic bidding. In this paper, Equal Incremental Cost Criteria (EICC) has been used for developing the optimal bidding strategy. The rival's bidding behavior has been formulated using a stochastic optimization model. Genetic Algorithm (GA), along with ac sensitivity factors, has been used to decide the optimal bidding strategy including congestion management to maximize the profit of the suppliers, considering single sided as well as double sided bidding. Both pure as well as probabilistic strategies have been simulated. Results with Sequential Quadratic Programming (SQP), a classical optimization method, and dc sensitivity factors have also been obtained to compare and establish the effectiveness of proposed method. Value at Risk (VaR) has been calculated as a measure of financial risk.