Development of Optimal Bidding Strategies for Generation Companies in Electricity Markets Based on Fuzzy Set Theory

Abstract

The power industry restructuring is undergoing in many countries around the world and asa result many electricity markets have been established. In the electricity market environment,profits of generation companies depend, to a large extent, on bidding strategies employed. Hence,how to develop optimal bidding strategies has become a major concern of generation companies. Inthis paper, a fuzzy set theory based method for building optimal bidding strategies is presented forgeneration companies participating in a recently established electricity market in which the widely-used step-wise bidding protocol is utilized and the available historical data is not sufficient. Takeninto account of the insufficient history data especially bidding data, bidding behaviors of rivalgeneration companies are modeled as fuzzy sets and a bidding strategy optimization model is thendeveloped. The well-known genetic algorithm is next employed to solve the bidding strategyoptimization problem. Finally, a simple numerical example with five generation suppliersparticipating in an electricity market is served for illustrating the essential features of the presentedmethod.