Bidding strategy for risk-averse producers in transmission-constrained electricity markets

In this paper a risk-averse producer who participates in a transmission-constrained day-ahead electricity market is considered. The producer objective is to maximize the expected profit from selling energy in the day-ahead market, avoiding at the same time the risk of experiencing low profit scenarios. For this purpose, a two-stage stochastic bi-level optimization model is developed, where the uncertainty lies in the day-ahead system load and the producer rivals´ offers. The risk associated with the producer profit variability is explicitly taken into account in the problem formulation. Test results on the IEEE Reliability Test System prove the effectiveness of incorporating the transmission network constraints into the proposed model and show how the risk level can affect significantly the producer profits. Finally, an appropriate postprocessing technique is applied for the construction of the producer units optimal offer curves.