Competitive bidding in electricity supply

As significant additional capacity comes on line in the United Kingdom, a genuine commercially competitive electricity supply market will gradually replace the prevailing somewhat artificial `market´ conditions. In genuinely competitive conditions, several producers compete to win a share of the market and bid against each other to supply the grid. The prices bid by suppliers for blocks of generation offered to the grid would reflect what portions of the load curve a supplier hopes to win for each type of plant in its possession. This, in turn, depends on production cost estimates, temporal considerations of system demand variation, unit commitment costs, and commercial considerations such as profit or economic utility maximisation and expectations of competitor behaviour. This is a wholly new situation, and has not been theorised or modelled to any significant extent. The paper develops conceptual models and mathematical tools for a fuller understanding of these issues