Investment and Bidding Strategies for Optimal Transmission Management Dynamics: The Italian Case

Luca Di Persio and Nicola Fraccarolo ()
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Luca Di Persio: Department of Computer Science, University of Verona, 37134 Verona, Italy
Nicola Fraccarolo: Department of Mathematics, University of Trento, 38123 Trento, Italy

Energies, 2023, vol. 16, issue 16, 1-16

Abstract: This paper explores the allocation process of Financial Transmission Rights (FTRs) in the Italian electricity market. FTRs are financial instruments allowing market participants to hedge against transmission congestion, also playing a critical role in ensuring the efficient use of the transmission system. We present a linear programming (LP) model that simulates the FTRs allocation process, taking into account the transmission capacity limits of the electric network when the total revenue is considered as the utility function. Obtained results highlight that our solution allows us to develop better investment and bidding strategies for optimal transmission management dynamics. In particular, numerical simulations show good results, with an overall MAPE of approximately 7%, indicating that the model accurately predicts the allocation of transmission rights across the network. Overall, the paper provides insights into the inner workings of the FTR allocation process in Italy, also providing improved market efficiency while increasing revenue for market participants.

Keywords: linear programming; transmission congestion; financial transmission rights; Italian electricity market; optimal bidding; bidding strategies; optimal management (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: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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