Optimal Supply Bidding with Risk Management in an Electricity Pay-as-Bid Auction

Abstract- It is very important for the participants in a competitive electricity market, which is concerned to various uncertainties, to develop an optimal bidding to achieve maximum profit, especially in a discriminatory pricing (Pay-as-Bid) auction. In this research, the market clearing price (MCP) of each hour assumed to be known as a probability density function (pdf). In this paper, the bidding problem is modeled from a supplier viewpoint and its optimal solution is obtained analytically based on the classical optimization theory. Also, the analytical solution for a multi step bid protocol is generalized and properties of the generalized solution will be discussed. The model is developed to consider concept of risk in the bidding decision making problem. Two different methods for handling the risk are introduced. The proposed two methods are compared using some numerical examples and the results are interpreted. In addition, the effect of variation of MCP's pdf parameters on supplier profit is studied and the results are presented