Strategic bidding of variable renewable energy sources in light-robust day-ahead electricity markets

Abstract

This paper investigates the optimal bidding behaviour of stochastic players in a light robust (LR) day-ahead (DA) market clearing formulation, which allows stochastic producers to represent their uncertainty ranges using uncertainty bids. The decision model of a stochastic player is cast as a bi-level stochastic optimization problem. The upper-level problem maximizes the player's profits in the DA market and imbalance settlement stage, which considers either single or dual imbalance pricing schemes. The lower-level problem captures then the LR DA market problem. The player's bidding behaviour is analysed with respect to its incentives to deviate from its true uncertainty range as part of its submitted bids. A set of case studies is introduced to characterize the strategic bidding of the player under differing individual and system imbalance positions. The results show that under single pricing imbalance settlement, the player has no economic incentive to deviate from its true uncertainty range if the system is expected to have predominantly negative imbalances. Conversely, when a positive system imbalance is anticipated, the player has an incentive to bid an untruthful range, resulting in an increase in profits ranging from a marginal 2.68% up to a sizeable 174.9% compared to submitting the true range. These incentives are, generally, mitigated under dual imbalance pricing, where no change in profits is observed for the same behaviour.