Influence of Bidding Mechanism and Spot Market Characteristics on Market Power of a Large Genco Using Hybrid DE/BBO

Abstract

Generation company (Genco) bidding in an electricity market (EM) aims to maximize its profit under uncertain market characteristics and a regulated bidding mechanism. This paper addresses the strategic bidding for a large price maker Genco and empirically investigates the effect of a step-wise multiple segment bidding mechanism and EM characteristics, such as demand and rivals’ behavior, on its market power (MP) potential and efficiency. The methodology of using novel hybrid differential evolution with biogeography-based optimization (DE/BBO), employing the sinusoidal migration model, is proposed for strategic bidding. DE exploration with BBO exploitation enhances global optimization. Uncertain rival behavior is modeled as normal distribution and simulated by the Monte Carlo technique. The proposed approach is validated for large Genco bidding in spot EM, under changing market characteristics and bidding segments. The implicit MP potential and efficiency of Genco for corresponding strategies is assessed using the criteria of expected profit, risk of profit variance, and failure rate of Genco. This assessment discovers an underlying correlation between the market characteristics and bidding segments, which would aid Genco in optimizing its bidding strategy and market performance.