Bi-level Optimization Model for the Biding of Retail Electricity Market Under Pay as Bid and Marginal Pricing

Competition is an important feature of a retail electricity market. For either "pay as bid" (PAB) or marginal pricing (MP), participants strive for maximizing benefits by self-optimization, whereas system operator (SO) manages the system generation by minimizing the total cost of all the generators. This paper investigates the competition of market participants through bi-level optimization. The lower level optimization considers the optimal decision of generators, whereas the upper level optimization is based on market clearing mechanism that minimize the total payments. Finally, simulation results under both PAB and MP mechanisms are compared and analyzed.