Estimation and Optimisation in Electricity Pool Markets

In electricity pool markets, generators submit offers of quantity-price pairs to an independent system operator, who dispatches power to meet loads at the lowest cost using these offers. The market-clearing price at any location is the marginal cost of supplying electricity to this location. By withholding capacity or offering at a high price, generators can influence the market-clearing price, which is also affected by their competitors ’ behaviour. We represent the uncertainty in the competitor offers and the demand by a single probability distribution called the market distribution function. In this paper, we explore a methodology to estimate the market distribution function and construct an offer stack that gives the maximum expected profit with respect to this distribution. A case study based on historical data from Mighty River Power will be presented