Study on Bidding Strategies of Power Suppliers with Asymmetric Generation Capacity

This work deals with strategies optimization for suppliers in the electricity market characterized by the presence of a large supplier competing against small suppliers acting as a fringe. Power bidding is a game process with incomplete information for costs are unknown to competitors. Based on the hypothesis that the supplier's bidding strategy is a function of cost, the market clearing price is an order statistic according to the settlement procedure. Then the optimal bidding models are presented with Bayesian game principle, and the optimal bidding strategies of suppliers are deduced by using optimization theory. The theoretical results suggest that truthful bidding is not an optimal reply for the big supplier even when all the opponents follow that strategy, but his bid is always above the cost and is increasing in cost. The expression of the large supplier's bidding strategy indicates that it is affected by the number of power suppliers, the total quantity of demand, the suppliers' generation capacity, and the distribution assumed for the small suppliers' costs. Moreover, the degree of generation capacity asymmetry among power suppliers have significantly effect on the large supplier's bidding behavior. At last, a simple numerical example is presented to illustrate the presented method.