Optimal bidding strategy of multi-carrier systems in electricity markets using information gap decision theory

Zhouding Liu and Morteza Nazari-Heris

Energy, 2023, vol. 280, issue C

Abstract: This paper proposes a novel optimization framework based on information gap decision theory (IGDT) for strategic participation of multi-carrier systems (MCS) in the electricity market under price uncertainty. The proposed framework helps the operator of MCS to take advantage of flexible generation units such as combined heat and power (CHP) systems, boilers, and battery energy storage systems (BESS) and participate in the electricity market considering the strategies presented by IGDT against the uncertainty in the market clearing price. The proposed optimization framework is developed as a bilevel problem, in which the risk-based bidding strategy of the MCS operator is modeled in the upper-level problem, and the energy market is cleared by the bulk power system operator in the lower-level problem. Karush–Kuhn–Tucker conditions are used to transform the bilevel problem into a single-level optimization problem. Duality theory is later used to approximate the product of power and market clearing price in the MCS operation problem, and the non-linearity enforced by the implementation of IGDT is handled by a linearization method called Triangle method. The studied optimization framework is modeled as a single-level mixed-integer linear programming problem, and CPLEX is used to solve it. The simulations are carried out on the modified IEEE 6-bus transmission network, and the results are analyzed to verify the economic and computation efficiency of the studied model. According to the simulation results, by taking a risk-averse bidding strategy provided by the IGDT, the operation cost of MCS increases 16.6% in order to increase the robustness level of MCS up to 36%, indicating that MCS becomes robust against 36% of the increase in the electricity market price, compared to the case with a risk-neutral bidding strategy being taken.

Keywords: Risk-based bidding; Energy markets; Market clearing process; Multi-carrier system; Uncertainty; Information gap decision theory (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:280:y:2023:i:c:s0360544223014378

DOI: 10.1016/j.energy.2023.128043

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