Optimal bidding strategies with risks for LSEs in competitive electricity markets

In competitive electricity markets which are open for both generation and distribution sides, Load Serving Entities (LSEs) are required to participate in the market competition with risks, since their profits usually reduced because of the shortage of power supply, and their purchasing prices were fluctuant with uncertainties due to the unforeseen bidding. This paper develops the optimal bidding strategies with risks for LSEs to participate in competitive electricity markets, in which stepwise bidding functions and pay-as-bid settlement protocols are utilized. A normal probability distribution function is used to describe the bidding behaviors of rivals, and the issue of constructing optimal bidding strategies for LSEs is formulated as a multi-objective stochastic optimization model, then MonteCarlo approach is applied to get the corresponding solutions. The proposed bidding strategies have been tested on an electricity market with 3 power companies (Gencos) and 4 LSEs, and relevant analyses have been presented.