The Study of GENCO's Bidding Strategies in a Pool-Based Electricity Market Using Cooperative and Non-Cooperative Game Theory

Because of the remarkable market share of Generation Companies (GENCOs) in the restructured electricity market, GENCOs competition for supplying electric of power may occur under oligopolistic environment. In such condition, for the sake of maximum profit each GENCO should provide optimal bids. This paper focuses on the short-run bidding behavior of GENCOs under an oligopolistic power market, while the interaction among GENCOs is studied by game theory. In case of non-cooperative GENCOs competition, game theory proposed Nash equilibrium as an optimal bidding strategy for each GENCO. On the other hand, GENCOs can make alliances with each other in order to propose their coordinated bids, the so called coalition condition. It can be argued that, the coalition's optimal bidding strategy will be calculated via cooperative game theory. Then the obtained profit from such coalition will be allocated among its members based upon Shapley value. In this paper it is assumed that GENCOs submit their bidding blocks in an economic model of supply function equilibrium (SFE). In order to modeling optimal bidding strategy problem of each GENCO, the bi-level programming method is employed in this research. In the upper level, the profit of GENCOs were maximized and in the lower level, the Independent System Operator (ISO) with the aim of minimizing consumers’ payment subjected to secured operation of power system, will clear the market. The proposed methodology is implemented on a 30-bus IEEE test system; considering both non-cooperative and cooperative competitions, while GENCOs optimal bidding strategies is calculated. Numerical results show that the efficient alliance has impressive impact on GENCOs profits.