Abstract
In this chapter, a methodology to simulate the strategic behaviour of generating companies in an oligopolistic electricity market, by using strategic supply functions, is proposed. In particular, electricity producers are assumed to bid in a pool-based electricity market [13]. Every day, generators submit prices for each generating set for the following day and the transmission system operator calculates the operating schedules that will meet the forecast levels of demand at minimum cost, based upon the bid prices. Then, for each time interval, typically half-hour, all generating sets in the schedule are paid the market-clearing price, which varies with demand and is based on the bid of the most expensive set in normal operation during that time interval.
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