A profit maximization model for a power producer in a pool-based energy market with cost recovery mechanism

The objective of this paper is to address the self-scheduling of a power producer in a pool-based energy market where a cost recovery mechanism is applicable. Under the cost recovery framework, generating units are guaranteed to receive payment at least equal to their actual operating cost, if committed. In the proposed model, the effect of cost recovery on the plant´s revenues is included in the objective of the profit maximization problem of the producer, who is assumed to be a price-taker. The proposed method is developed as a mixed-integer linear program using GAMS/CPLEX and tested for the simple case of a small thermal producer owning a single unit, under the general cost recovery provisions of the Greek electricity market. The model constitutes the first step towards a stochastic programming approach for a price-maker producer.