Decision making of an electricity supplier´s bid in a spot market

In a market environment, profitability is the main objective for market players. This paper describes an environment in which suppliers sell electricity via a single auction system, e.g., the UK market. The suppliers submit bids to sell electricity. The market is cleared by maximizing social welfare, subject to power system operational constraints. The bidding decision is optimized from a single supplier´s viewpoint. A probabilistic model is proposed for competing suppliers. Their bids are described by probability distributions constructed from decision-maker´s observations. The single supplier´s decision-making problem is solved by stochastic optimization. The expected value of the profit is calculated over the decision options. This study also shows that in a “multiplecommodity second price auction”, the suppliers have an incentive to bid at marginal costs