Strategic bidding in reserve market

Abstract

In this paper, the problem of building the optimal bidding strategies for competitive suppliers in the California-type spinning reserve market is addressed. In this market, each supplier is required to submit a capacity bid and an energy bid simultaneously, and selection of spinning reserve suppliers is solely based on the capacity bids and the required spinning reserve amount broadcast by the independent system operator (ISO). In this procedure, the uniform market clearing price rule is employed. Winners of capacity bids may be asked to provide energy in ISO's real time dispatch according to system operation requirements, and the dispatch of energy supply is based on energy bids with application of the uniform market clearing price rule. It is assumed that each supplier bids a linear capacity supply function and a linear energy supply function into the spinning reserve market, and each supplier chooses the coefficients in these two supply functions to maximize benefits, subject to expectations about how rival suppliers will bid. A stochastic optimization model is first developed to describe this problem and a genetic algorithm based method is then employed to solve it. A numerical example is utilized to illustrate the essential features of the method.