Rights Creative Commons: Attribution 3.0 Hong Kong License Optimal Bidding Strategies for Generation Companies in Electricity Markets with Transmission Capacity Constraints Taken into Account

Abstract-. In the electricity market environment, how to build optimal bidding strategies has become a major concern for generation companies. The deficiency of transmission capacity could lead to congestion, and as a result, the whole electricity market can then he actually divided into two or more suhmarkets. A direct consequence of transmission congestion is the change of competitive positions of generdtion companies concerned in the electricity market, and the optimal bidding strategies of them should accordingly he changed. In this paper, the problem of developing optimal bidding strategies for generation companies is systematically investigated with transmission capacity constraints taken into account. A stochastic optimization model is first formulated under the presumption that the bidding behaviors of rival generation companies could be modeled as normal probability distributions. An approach is next presented for solving the optimization problem using the well-known Munte Carlo simulation method and the genetic algorithm. Finally, a simple sample example and the modified IEEE 1Chus system are employed to illustrate the essential features ofthe proposed model and method. Index Terms- electricity market, Bidding strategy, congestion management, market power, Monte Carlo simulation, genetic algorith