Development of Optimal Bidding Strategies for Generation Companies in Electricity Markets Based on Fuzzy Set Theory

The power industry restructuring is undergoing in many countries around the world and as a result many electricity markets have been established. In the electricity market environment, profits of generation companies depend, to a large extent, on bidding strategies employed. Hence, how to develop optimal bidding strategies has become a major concern of generation companies. In this paper, a fuzzy set theory based method for building optimal bidding strategies is presented for generation companies participating in a recently established electricity market in which the widely-used step-wise bidding protocol is utilized and the available historical data is not sufficient. Taken into account of the insufficient history data especially bidding data, bidding behaviors of rival generation companies are modeled as fuzzy sets and a bidding strategy optimization model is then developed. The well-known genetic algorithm is next employed to solve the bidding strategy optimization problem. Finally, a simple numerical example with five generation suppliers participating in an electricity market is served for illustrating the essential features of the presented method.