Optimal bidding strategy of a gas-fired power plant in interdependent low-carbon electricity and natural gas markets

Christos N. Dimitriadis, Evangelos G. Tsimopoulos and Michael C. Georgiadis

Energy, 2023, vol. 277, issue C

Abstract: This work presents a bi-level optimization framework to determine the optimal bidding strategies for a strategic gas-fired power plant, exerting market power in interdependent pool-based electricity and natural gas markets, under a carbon emission trading scheme (CETS). The upper-level problem aims at maximizing the profits of the strategic player, while at the lower-level problem, the day-ahead electricity and natural gas markets are cleared sequentially, considering the provision of carbon emission allowances for conventional power producers and high penetration of wind power generation. The bi-level formulation is initially recast into a mathematical program with equilibrium constraints (MPEC), using the Karush-Kuhn-Tucker optimality conditions and duality theory, and is further reformulated into a mixed integer linear program. The proposed algorithm is applied to a Pennsylvania-New Jersey-Maryland (PJM) 5-bus power grid, incurred by transmission constraints and a single node natural gas network. Numerical simulations provide CETS-embedded electricity clearing prices and optimal bidding decisions for the strategic gas-fired power plant, under plausible power transmission congestions and natural gas prices increment scenarios.

Keywords: Bi-level programming; Gas-fired power plant; Electricity market; Natural gas market; Strategic bidding; Carbon emission trading (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:277:y:2023:i:c:s0360544223011040

DOI: 10.1016/j.energy.2023.127710

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