Optimal day-ahead offering strategy for large producers based on market price response learning

Abstract

In day-ahead electricity markets based on uniform marginal pricing, small variations in the offering and bidding curves may substantially modify the resulting market outcomes. In this work, we deal with the problem of finding the optimal offering curve for a risk-averse profit-maximizing generating company (GENCO) in a data-driven context. In particular, a large GENCO’s market share may imply that its offering strategy can alter the marginal price formation, which can be used to increase profit. We tackle this problem from a novel perspective. First, we propose an optimization-based methodology to summarize each GENCO’s step-wise supply curves into a subset of representative price-energy blocks. Then, the relationship between the resulting market price and the energy block offering prices is modeled through a probabilistic forecasting tool: a Distributional Neural Network, which also allows us to generate stochastic scenarios for the sensibility of the market towards the GENCO strategy via a set of linear constraints. Finally, this predictive model is embedded in the stochastic optimization model employing a constraint learning approach. Results show how allowing the GENCO to deviate from its true marginal costs renders significant changes in its profits and the marginal price of the market. Additionally, these results have also been tested in an out-of-sample validation setting, showing how this optimal offering strategy can effective in a real-world market context.