Generation bidding game with flexible demand
Yuquan Shan, Jayaram Raghuram, George Kesidis, Christopher Griffin,, Karl Levitt, David J. Miller, Jeffry Rowe, Anna Scaglione

TL;DR
This paper models a deregulated electricity market with price-responsive demand, analyzing bidding strategies and equilibrium outcomes through a simplified framework and numerical experiments.
Contribution
It introduces a simple model of generation bidding with flexible demand and identifies a price-symmetric Nash equilibrium using numerical methods.
Findings
Identified a Nash equilibrium in the simplified market model
Demonstrated complex dispatch dynamics despite idealizations
Provided insights into bidding behavior in deregulated electricity markets
Abstract
For a simple model of price-responsive demand, we consider a deregulated electricity marketplace wherein the grid (ISO, retailer-distributor) accepts bids per-unit supply from generators (simplified herein neither to consider start-up/ramp-up expenses nor day-ahead or shorter-term load following) which are then averaged (by supply allocations via an economic dispatch) to a common "clearing" price borne by customers (irrespective of variations in transmission/distribution or generation prices), i.e., the ISO does not compensate generators based on their marginal costs. Rather, the ISO provides sufficient information for generators to sensibly adjust their bids. Notwithstanding our idealizations, the dispatch dynamics are complex. For a simple benchmark power system, we find a price-symmetric Nash equilibrium through numerical experiments.
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Taxonomy
TopicsElectric Power System Optimization · Auction Theory and Applications · Smart Grid Energy Management
