Operations in power systems with competitive environment

We present a theoretical negotiation method to provide a rational operation decision of the power systems under competitive environment by the game theory. The derived operation rules reflecting the competition can be viewed as an extension of the conventional equalizing incremental cost method. As indicated in this paper, the prices of electricity for purchases and sales are equal to the incremental cost of the generators of IPPs but are generally cheaper than the incremental cost of the generators belonging to the utility. When presuming that the purchased electric energy for the utility is a function of the prices, we show that both the Nash equilibrium and the Stackelberg strategy have the same solution. To examine the proposed approach, several systems are used as the demonstrated examples in this paper.