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Impacts of previous revenues on bidding strategies in electricity market: A quantitative analysis

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  • Li, Qirui
  • Yang, Zhifang
  • Yu, Juan
  • Li, Wenyuan

Abstract

With the development of electricity markets, generation companies (GenCos) generally participate in multiple markets at different time steps to earn profits. GenCos’ previous revenues obtained from earlier markets affect their judgement on risks, and thus influence their strategic bidding behavior. However, this influence on bidding behaviors caused by previous revenues from earlier markets is generally neglected in existing studies. This paper proposes a methodology to quantitatively analyze the effect of previous revenue on a GenCo’s bidding strategy. A bidding behavior model based on the prospect theory is developed to establish the relationship between previous revenue and bidding strategy. Then, the bidding behavior characteristics under the influence of previous revenue is derived and analyzed based on the established relationship. Finally, several typical bidding modes are summarized from the bidding behavior characteristics. Simulation results show that previous revenue has an obvious influence on the GenCo’s bidding behavior. The GenCo shows different bidding tendencies under different ranges of previous revenues due to the change in risk preference. The results of this paper validate the necessity of considering previous revenue in market equilibrium analysis and can help regulators to coordinately design the electricity market considering the coupling bidding behaviors of GenCos.

Suggested Citation

  • Li, Qirui & Yang, Zhifang & Yu, Juan & Li, Wenyuan, 2023. "Impacts of previous revenues on bidding strategies in electricity market: A quantitative analysis," Applied Energy, Elsevier, vol. 345(C).
    • Handle: RePEc:eee:appene:v:345:y:2023:i:c:s0306261923006682
    DOI: 10.1016/j.apenergy.2023.121304
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    References listed on IDEAS

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