Optimum price bidding strategy in the short-term market of hydro-dominated systems

This paper investigates the possibility of establishing optimum price bidding strategies in the short-term market of systems with hydroelectric predominance, with emphasis in the Brazilian system. The possibility of establishing optimum price bidding strategies is evaluated in the two possible price formation schemes used in hydro-dominated systems. The one currently used in Brazil, known as tight pool, where price are determined centrally through optimization models, and where only the thermal generators bid prices. The possibility of using strategic bidding is also evaluated in a general price bidding scheme, where hydro generators are also allowed to bid prices. In establishing optimum price bidding strategies, one crucial issue is modeling competitor´s price bidding behavior. Due to the lack of historical data in Brazil, the price bidding behavior of the competitors is modeled by triangular probability distributions, equivalent to some membership functions typically used in fuzzy modeling.