Optimal Bidding Strategy for Financial Transmission Right

Financial transmission right (FTR) is an important tool to hedge transmission congestion charges in electricity market. The paper presents optimal bidding strategies for Financial Transmission Rights in an auction. In the FTR auction, FTR prices are affected by bidding prices from bidders; therefore, bidders may have market power to influence the auction clearing price by bidding strategically. In the proposed method, a conjectured price influence function is used to model bidders´ market power on auction price. Market equilibrium is reached through the interaction among bidders and independent system operator (ISO) subject to bidders´ strategic bidding. The numerical examples are shown to demonstrate the impact of bidders´ market power on the FTR auction.