Long Term Expected Revenue of Wind Farms Considering the Bidding Admission Uncertainty

Mazaher Haji Bashi, Gholamreza Yousefi, Claus Leth Bak and Jayakrishnan Radhakrishna Pillai
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Mazaher Haji Bashi: Department of Electrical and Computer Engineering, Isfahan University of Technology, Isfahan 84156-83111, Iran
Gholamreza Yousefi: Department of Electrical and Computer Engineering, Isfahan University of Technology, Isfahan 84156-83111, Iran
Claus Leth Bak: Energy Technology Department, Aalborg University of Denmark, 9100 Aalborg, Denmark
Jayakrishnan Radhakrishna Pillai: Energy Technology Department, Aalborg University of Denmark, 9100 Aalborg, Denmark

Energies, 2016, vol. 9, issue 11, 1-17

Abstract: As a long term bidding behavior, bid shading is exhibited by wind farms participating in real Uniform Price (UP) markets. This signifies that the wind farm owners bid far below their true long run marginal cost. In this paper, a method is proposed to consider the uncertainty of bidding admission in the long term expected revenue of wind farms. We show that this consideration could perfectly explain the observed bid shading behavior of wind farm owners. We use a novel market price model with a stochastic model of a wind farm to derive indices describing the uncertainty of bidding admission. The optimal behavior of the wind farm is then obtained by establishing a multi objective optimization problem and subsequently solved using genetic algorithm. The method is applied to the analysis of long term bidding behavior of a wind farm participating in a Pay-as-Bid (PAB) auction such as Iran Electricity Market (IEM). The results demonstrate that wind farm owners change their bid shading behavior in a PAB Auction. However, the expected revenue of the wind farm will also decrease in a PAB auction. As a result, it is not recommended to make an obligation for the wind farms to participate in a PAB auction as a normal market player.

Keywords: wind farm expected revenue; market price uncertainty; bidding Admission uncertainty; genetic algorithm; PAB and UP auctions; long term bidding behavior (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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