Strategic bidding and transmission rights purchase for generator´s payoff maximisation

As the electricity market transits into deregulation, customers and generators are given the liberty of deciding on the bid functions they submit and the amount of transmission rights they purchase in the market. These determine the payoffs they achieve from the market. In this paper, we evaluate how generators maximize their payoffs achieved from the market by making strategic decisions about the bid functions they submit and the transmission rights they purchase in the network. Strategical interdependency between decisions for when there are 2 or more generators in the market is also considered and modelled using matrix game. A Nash equilibrium reflecting the strategies the generators should pick is then identified using the max-min theorem. The application of the max-min theorem on the matrix game is modelled as a mixed integer linear programming problem. The proposed matrix game is applied and analyzed on 2 bus and 3 bus systems.