Strategic Offering to Maximize Day-Ahead Profit by Hedging Against an Infeasible Market Clearing Result

This paper presents a profit-maximizing offering strategy for a price taker power producer participating in the day-ahead spot market as organized under the Power Exchange model. The offering strategy maximizes profit by mitigating profit risk due to price forecast uncertainty leading to an imbalance arising from being accepted by the market operator (MO) to produce an infeasible dispatch schedule. The strategy makes use of a price forecast confidence interval to build hourly offer curves. The offering strategy is applied to realistic price scenarios as obtained from the Iberian MO. The performance is compared to alternative offering strategies using the agent-based OPTIMATE simulator. Results indicate that the offering strategy increases profit, reduces profit risk and reduces balancing costs arising from differences between the accepted and actual dispatch schedule. Consequently, the presented strategy outperforms the literature benchmark strategy in 83% of the cases.