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Open AccessArticle

How Elastic Demand Affects Bidding Strategy in Electricity Market: An Auction Approach

by Debin Fang 1, Qiyu Ren 1 and Qian Yu 2,*
1
Economics and Management School, Wuhan University, Wuhan 430072, China
2
School of Economics, Wuhan University of Technology, Wuhan 430070, China
*
Author to whom correspondence should be addressed.
Energies 2019, 12(1), 9; https://doi.org/10.3390/en12010009
Received: 20 November 2018 / Revised: 12 December 2018 / Accepted: 17 December 2018 / Published: 21 December 2018
(This article belongs to the Section Electrical Power and Energy System)
The deepening of electricity reform results in increasingly frequent auctions and the surge of generators, making it difficult to analyze generators’ behaviors. With the difficulties to find analytical market equilibriums, approximate equilibriums were obtained instead in previous studies by market simulations, where in some cases the results are strictly bound to the initial estimations and the results are chaotic. In this paper, a multi-unit power bidding model is proposed to reveal the bidding mechanism under clearing pricing rules by employing an auction approach, for which initial estimations are non-essential. Normalized bidding price is introduced to construct generators’ price-related bidding strategy. Nash equilibriums are derived depending on the marginal cost and the winning probability which are computed from bidding quantity, transmission cost and demand distribution. Furthermore, we propose a comparative analysis to explore the impact of uncertain elastic demand on the performance of the electricity market. The result indicates that, there exists market power among generators, which lead to social welfare decreases even under competitive conditions but elastic demand is an effective way to restrain generators’ market power. The feasibility of the models is verified by a case study. Our work provides decision support for generators and a direction for improving market efficiency. View Full-Text
Keywords: uniform clearing price auction; electricity market; bidding strategies; asymmetric information; social welfare uniform clearing price auction; electricity market; bidding strategies; asymmetric information; social welfare
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Fang, D.; Ren, Q.; Yu, Q. How Elastic Demand Affects Bidding Strategy in Electricity Market: An Auction Approach. Energies 2019, 12, 9.

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