The University of Southampton
University of Southampton Institutional Repository

Epsilon-optimal bidding in electricity markets with discontinuous market distribution function

Epsilon-optimal bidding in electricity markets with discontinuous market distribution function
Epsilon-optimal bidding in electricity markets with discontinuous market distribution function
This paper investigates the optimal bidding strategy (supply function) for a generator offering power into a wholesale electricity market. The model has three characteristics: the uncertainties facing the generator are described by a single probability function, namely the market distribution function; the supply function to be chosen is nondecreasing but need not be smooth; the objective function is the expected profit which can be formulated as a Stieltjes integral along the generator's supply curve. In previous work the market distribution function has been assumed smooth, but in practice this assumption may not be satisfied. This paper focuses on the case that the market distribution function is not continuous, and hence an optimal supply function may not exist. We consider a modified optimization problem and show the existence of an optimal solution for this problem. Then we show constructively how such an optimum can be approximated with an epsilon-optimal supply function by undercutting when the generator does not hold a hedging contract (and possibly overcutting when the generator has a hedging contract). Our results substantially extend previous work on the market distribution model.
1391-1418
Anderson, Edward J.
1279b761-3da8-431f-93be-9f2370e354d9
Xu, Huifu
d3200e0b-ad1d-4cf7-81aa-48f07fb1f8f5
Anderson, Edward J.
1279b761-3da8-431f-93be-9f2370e354d9
Xu, Huifu
d3200e0b-ad1d-4cf7-81aa-48f07fb1f8f5

Anderson, Edward J. and Xu, Huifu (2005) Epsilon-optimal bidding in electricity markets with discontinuous market distribution function. SIAM Journal on Control and Optimization, 44 (4), 1391-1418.

Record type: Article

Abstract

This paper investigates the optimal bidding strategy (supply function) for a generator offering power into a wholesale electricity market. The model has three characteristics: the uncertainties facing the generator are described by a single probability function, namely the market distribution function; the supply function to be chosen is nondecreasing but need not be smooth; the objective function is the expected profit which can be formulated as a Stieltjes integral along the generator's supply curve. In previous work the market distribution function has been assumed smooth, but in practice this assumption may not be satisfied. This paper focuses on the case that the market distribution function is not continuous, and hence an optimal supply function may not exist. We consider a modified optimization problem and show the existence of an optimal solution for this problem. Then we show constructively how such an optimum can be approximated with an epsilon-optimal supply function by undercutting when the generator does not hold a hedging contract (and possibly overcutting when the generator has a hedging contract). Our results substantially extend previous work on the market distribution model.

Full text not available from this repository.

More information

Published date: 2005
Organisations: Operational Research

Identifiers

Local EPrints ID: 29659
URI: https://eprints.soton.ac.uk/id/eprint/29659
PURE UUID: b9c58cf5-d1f1-4d25-92a0-94aad43e8b92

Catalogue record

Date deposited: 11 May 2006
Last modified: 17 Oct 2017 11:52

Export record

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of https://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×