Strategic Bidding in Electricity Markets: A Power Grid Partitioning Approach

By bidding strategically, a producer firm owning several generators aims to maximize its profit by submitting optimum bids to the wholesale electricity markets. For a bulk power producer that influences the price of electricity, i.e. a price-maker producer, strategic bidding problem appears as a highly non-convex and challenging optimization problem. The computation time of state-of-art solution method for strategic bidding problem increases linearly as the number of random scenarios or scheduling horizon increases. However the computation time of state-of-art approach increases significantly as the size of power grid increases. This paper proposes a partitioning method that when combined by the state-of-art solution method results in considerable reduction in computation time.