Computing Optimum Bidding Strategy of Gencos Using Simulated Annealing Method

This paper describes a new method that uses simulated annealing (SA) method for analyzing the competition among Generating Companies (Gencos) where they have incomplete information about their opponents. Each Genco models its opponents with their generating cost coefficients. The proposed methodology employs the supply function equilibrium (SFE) for modeling a Genco´s bidding strategy. Gencos change their bidding strategies until Nash equilibrium points are obtained. Nash equilibrium constitutes a central solution concept in game theory. The task of detecting the Nash equilibria of a finite strategic game remains a challenging up-to-date. This paper uses SA to compute Nash equilibria strategies of Gencos and then the obtained results are compared with another computational intelligence technique (Genetic Algorithm) and a mathematical method (GAMS/DICOPT).