Integrating Risk Preference of Virtual Bidders in Cournot Equilibrium Analysis of Electricity Markets

This paper considers the virtual bidding which arbitrages between the day-ahead(DA) and real-time(RT) electricity markets, and studies the influence of virtual bidders’ risk preference on the DA market equilibrium when facing uncertain RT market prices. For this purpose, a Cournot equilibrium model for DA wholesale electricity market is presented taking into considerations of the virtual bidding and virtual bidders’ risk preference. The scenario generation and reduction methods are used to deal with the uncertainty in RT market prices. Conditional value-at-risk (CVaR) is employed to describe the risks faced by virtual bidders. Then, the nonlinear complementarity method is applied to solve the equilibrium problem. Finally, the effectiveness of the model is verified by numerical simulations. It is shown that when virtual bidders are more risk-seeking, the virtual bidding will play a more effective role in discovering the real value of electricity in the DA market.