Finding Joint Bidding Strategies for Day-Ahead Electricity and Related Markets

In restructured electricity markets, generators and other market participants submit bids to the system operator, who dispatches power while satisfying the system constraints. Dispatch establishes the market clearing price for electricity at each node of the network. In recent years, power market participants have begun competing in electricity-related markets for financial instruments such as financial transmission rights (FTRs) and CO ₂ allowances. Benefits derived from these markets depend largely on the electricity dispatch. For example, payments received by FTR holders are determined by the differential market clearing price between the nodes; CO ₂ allowances needed by the generators depend on the amount of fossil fuel-based electricity dispatched in the network. Hence, the participants must develop bidding strategies that maximize their joint profits from electricity and other related markets. This chapter, presents a multi-tier game theoretic framework that can be used to develop joint bidding strategies. In the electricity market, we focus on day-ahead and spot market bidding. Though there are many market participants (generators, loads, and third parties), the framework presented in this chapter caters directly to the needs of the generators. The multi-player matrix games underlying the framework are solved using an approach that incorporates a reinforcement learning algorithm. Application of the framework is exemplified via three example problems.