Stochastic EPEC approach for wind power trading in competitive electricity market

As a consequence of maturing technologies and regulatory interventions, wind power producers (WPPs) are likely to participate strategically in competitive electricity markets. In wind dominated oligopolistic electricity markets, strategic WPPs would optimize their offering bids considering rival behavior. In this perspective, stochastic equilibrium problem with equilibrium constraints (EPEC) model is proposed, to develop optimal offering strategy for WPPs that participate as price-makers in day-ahead electricity market and as price takers in balancing market. Strategic behavior of such WPPs is modeled using bi-level model that can be recast as stochastic mathematical problem with equilibrium constraints (MPEC). In the bi-level model, upper-level represents profit maximization problem of WPPs, while lower-level represents market clearing problem of independent system operator (ISO). Wind power and balancing market price uncertainties are modeled through scenarios. MPECs of all strategic WPPs are solved simultaneously using diagonalisation. Realistic case studies are simulated to show effectiveness of the proposed approach. Obtained results show that proposed approach can increase WPPs´ profits significantly.