Analysis of an electricity market equilibrium model with penalties for wind power´s bidding deviation

In an electricity market with strategic bidding of wind power, penalties are applied whenever the delivered wind power deviates from the bid. In order to investigate the impacts of bidding deviation penalties on wind firm´s bidding behaviors, a stochastic Cournot equilibrium model is presented. In this model, a scenario reduction technique is employed to describe the uncertainty of wind speed. We use nonlinear complementarity methods to solve this model. Then numerical examples are given to verify the reasonableness and effectiveness of the proposed model. It is shown that the penalty mechanism stimulates wind firms to reduce bidding error. This conduces to market regulators to mitigate wind firms´ bidding deviations through appropriate penalty.