Strategic bidding of transmission-constrained GENCOs with incomplete information

This work describes a method for analyzing the competition among transmission-constrained generating companies (GENCOs) with incomplete information. Each GENCO models its opponents´ unknown information with specific types for transforming the incomplete game into a complete game with imperfect information. The proposed methodology employs the supply function equilibrium for modeling a GENCO´s bidding strategy. The competition is modeled as a bilevel problem with the upper subproblem representing individual GENCOs and the lower subproblem representing the independent system operator (ISO). The upper subproblem maximizes the individual GENCOs´ payoffs and the lower subproblem solves the ISO´s market clearing problem for minimizing consumers´ payments. The bilevel problem is solved by developing sensitivity functions for a GENCO´s payoff with respect to its bidding strategies. An eight-bus system is employed to illustrate the proposed method, and the numerical results show the impact of transfer capability on GENCOs´ bidding strategies.