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Offer Stack Optimization in Electricity Pool Markets

Author

Listed:
  • Philip J. Neame

    (Department of Mathematical Sciences, University of Technology, Sydney, Australia)

  • Andrew B. Philpott

    (Department of Engineering Science, University of Auckland, Auckland, New Zealand)

  • Geoffrey Pritchard

    (Department of Statistics, University of Auckland, Auckland, New Zealand)

Abstract

We consider a generator making offers of energy into an electricity pool market. For a given time period, it must submit an offer stack, consisting of a fixed number of quantities of energy and prices at which it wants these quantities dispatched. We assume that the generator cannot offer enough power to substantially affect the market price, so the optimal response would be to offer energy at marginal cost. However, the market rules do not permit an arbitrary function, so the problem is to find an offer stack approximating marginal cost in a way that maximizes its profit. We give optimality conditions for this problem and derive an optimization procedure based on dynamic programming. This procedure is illustrated by applying it to several examples with different costs of production.

Suggested Citation

  • Philip J. Neame & Andrew B. Philpott & Geoffrey Pritchard, 2003. "Offer Stack Optimization in Electricity Pool Markets," Operations Research, INFORMS, vol. 51(3), pages 397-408, June.
    • Handle: RePEc:inm:oropre:v:51:y:2003:i:3:p:397-408
    DOI: 10.1287/opre.51.3.397.14955
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    References listed on IDEAS

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    Cited by:

    1. G. Pritchard & G. Zakeri, 2003. "Market Offering Strategies for Hydroelectric Generators," Operations Research, INFORMS, vol. 51(4), pages 602-612, August.
    2. Bosman, M.G.C. & Bakker, V. & Molderink, A. & Hurink, J.L. & Smit, G.J.M., 2012. "Planning the production of a fleet of domestic combined heat and power generators," European Journal of Operational Research, Elsevier, vol. 216(1), pages 140-151.
    3. Nigel Cleland & Golbon Zakeri & Geoff Pritchard & Brent Young, 2015. "Boomer-Consumer: a model for load consumption and reserve offers in reserve constrained electricity markets," Computational Management Science, Springer, vol. 12(4), pages 519-537, October.
    4. Bobo, Lucien & Mitridati, Lesia & Taylor, Josh A. & Pinson, Pierre & Kazempour, Jalal, 2021. "Price-region bids in electricity markets," European Journal of Operational Research, Elsevier, vol. 295(3), pages 1056-1073.
    5. Fleten, Stein-Erik & Haugstvedt, Daniel & Steinsbø, Jens Arne & Belsnes, Michael & Fleischmann, Franziska, 2011. "Bidding hydropower generation: Integrating short- and long-term scheduling," MPRA Paper 44450, University Library of Munich, Germany.
    6. Boomsma, Trine Krogh & Juul, Nina & Fleten, Stein-Erik, 2014. "Bidding in sequential electricity markets: The Nordic case," European Journal of Operational Research, Elsevier, vol. 238(3), pages 797-809.
    7. F.-Javier Heredia & Marcos Rider & Cristina Corchero, 2012. "A stochastic programming model for the optimal electricity market bid problem with bilateral contracts for thermal and combined cycle units," Annals of Operations Research, Springer, vol. 193(1), pages 107-127, March.
    8. Derek W. Bunn & Fernando S. Oliveira, 2008. "Modeling the Impact of Market Interventions on the Strategic Evolution of Electricity Markets," Operations Research, INFORMS, vol. 56(5), pages 1116-1130, October.

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