Co-evolutionary approach for strategic bidding in competitive electricity markets

Abstract

Determining optimal bidding strategies in a competitive electricity market to maximize the profit of each bidder is a challenging economic game problem. In this paper, it is formulated as a bi-level optimization problem in which, in the lower level, the community’s social welfare is maximized by solving a power flow problem while, in the upper level, the profits of individual bidders are maximized. In this bidders’ game, instead of using a set of discrete strategies as is usual, we consider continuous functions as strategies. To solve the upper-level problem, two co-evolutionary approaches are proposed and, for the lower level, an interior point algorithm is applied. Three IEEE benchmark problems in four different scenarios are solved and their results compared with those obtained from two conventional approaches and the literature which indicate that the proposed approaches have some merit regarding quality and efficiency.