Nash equilibrium bidding strategies in a pool based electricity market

Abstract

This work is to examine the bidding strategies in a pool based electricity market in which generating companies submit their bids for the available loads. A load accepts electricity delivery from the generator with the lowest bid at its bid price as long as this price is not higher than the load's willingness to pay. The competition among pool participants is modelled as a non-cooperative game with incomplete information. It is assumed that each Pool participant knows its own operation costs but does not know his opponents' operational costs. The game having incomplete information is transformed into a game with complete, but imperfect, information about operation cost and solved using the Nash equilibrium idea. The Nash equilibrium calculation is done through cournot model matrix approach. The same game is considered in the sense of perfect competition and generation amount are calculated. Profit calculation is done for the output of both the methods. Through the comparison of various test systems' profit in both the methods, the best method is found out for benefiting the power market participants. This work is to provide support for pricing electricity in deregulated pools.