A bi-level model of wholesale market in transition period of electricity deregulation

The efficient operation of wholesale market is based on the fair competition of the participants. After the separation of generation and transmission, the generators have to participate in the competition independently. But the differences of their fixed costs may conceal the differences of the variable costs, which may cause that some inefficient generators are even more competitive than the efficient ones. In such case the simple competition on price is not enough to enhance the actual efficiency of the generators, and the electricity deregulation may fail. In this paper, we propose a bi-level model of wholesale market to deal with this typical problem. After normal optimal dispatch, efficiency replacement is designed as the second level to revise the output of the generators. The experiment shows that this model could enhance the generation efficiency and reduce the variable cost obviously, which also confirms the feasibility of the model.