Abstract
In electricity markets, the financial transmission right (FTR) is an important tool for hedging congestion charges. A risk-constrained FTR bidding model is proposed for transmission auction markets. Based on the forecast differential LMP between sink and source points of certain FTRs, bidders try to maximise their expected pay-offs by taking into account the associated risks. Supposing the forecasted distribution of differential LMPs and bidders' risk preferences are known among all bidders, the problem is modelled as a bilevel optimisation with the upper subproblem representing bidders and the lower subproblem representing the solution to the ISO's FTR market clearing problem for maximising the revenues collected from the FTR auction. The bilevel optimisation problem is solved by developing the sensitivity of a bidder's expected utility with respect to its bidding strategies. A three-bus system with four bidders is considered to illustrate the proposed method. The results show the impact of forecasted differential LMP and bidders' preferred risk level on FTR bidding.
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