INFLUENCE OF PRICE UNCERTAINTY MODELING ACCURACY ON BIDDING STRATEGY OF A MULTI-UNIT GENCO IN ELECTRICITY MARKETS

In deregulated electricity markets, strategic bidding plays an important role in a
generation company’s (GENCO’s) profit maximization. A reasonable profit making bidding
strategy is presented in this paper, taking into account price uncertainty as well as generator cost
characteristics. Price uncertainty is considered through various statistical distributions, ensuring
success in bidding process with a specified degree of confidence. The screening curve, generally
used for economic evaluation of generating units in planning and operation studies, is utilized to
characterize generator costs. The logically developed bidding strategy is implemented on a
GENCO, that owns five different generating units. Fixed, variable and no load cost of generating
units is taken into consideration to calculate GENCO profit. No load cost occurs when unit loses
bid and cannot shutdown due to unit commitment constraints. Historical data of PJM electricity
market is used to model price uncertainty. Finally, a comparative analysis is carried out to access
the influence of accuracy of price uncertainty modeling on the GENCO profit.