Arbitrage opportunities between energy, bilateral contracts and ancillary service markets

A competitive generation company (GENCO) can maximize its profit by discovering arbitrage opportunities in electricity markets. This paper formulates a GENCO´s arbitrage problem using price-based unit commitment (PBUC). The GENCO could consider arbitrage between local generation and purchase from energy market for its bilateral contracts, as well as simultaneous trades with spot markets for energy and ancillary services. In this work, arbitrage opportunities among energy, bilateral contract, and ancillary service are discussed based on PBUC that solved by dynamic programming. Given forecasted hourly market prices, a single unit is considered for the analysis of the arbitrage problem. Based on the case studies, the effect of arbitraging for profit maximization is investigated and verified by computer simulations.