A preliminary study on strategic bidding in electricity markets with step-wise bidding protocol

The power industry of China is now being restructured and generation markets are expected to be established nationwide in 10-15 years. Zhejiang provincial electricity market, as a pilot one, has been successfully operated for more than two years. Under electricity market environment, the profits of generation companies depend, to a large extent, on their bidding strategies. As a result, how to develop the optimal bidding strategy has become a major concern of generation companies. Given this background, a model of bidding strategies based on Zhejiang provincial electricity market in which step-wise bidding rules are utilized is developed in this paper. Rival bidding behaviors are described by a normal distribution function, and the problem of building the optimal bidding strategy for a generation company is then formulated as a stochastic optimization problem, and solved by a Monte Carlo approach. A simple numerical example with five suppliers is served for illustrating the essential features of the presented method.