A Bayesian inference approach to unveil supply curves in electricity markets

Research output: Research - peer-reviewJournal article – Annual report year: 2017

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With increased competition in wholesale electricity markets, the need for new decision-making tools for strategic producers has arisen. Optimal bidding strategies have traditionally been modeled as stochastic profit maximization problems. However, for producers with non-negligible market power, modeling the interactions with rival participants is fundamental. This can be achieved through equilibrium and hierarchical optimization models. The efficiency of these methods relies on the strategic producer's ability to model rival participants' behavior and supply curve. But a substantial gap remains in the literature on modeling this uncertainty. In this study we introduce a Bayesian inference approach to reveal the aggregate supply curve in a day-ahead electricity market. The proposed algorithm relies on Markov Chain Monte Carlo and Sequential Monte Carlo methods. The major appeal of this approach is that it provides a complete model of the uncertainty of the aggregate supply curve, through an estimate of its posterior distribution. We show on a small case study that we are able to reveal accurately the aggregate supply curve with no prior information on rival participants. Finally we show how this piece of information can be used by a price-maker producer in order to devise an optimal bidding strategy.
Original languageEnglish
JournalI E E E Transactions on Power Systems
Number of pages11
ISSN0885-8950
DOIs
StatePublished - 2017

Bibliographical note

(c) 2017 IEEE. Personal use of this material is permitted. Permission from IEEE must be obtained for all other users, including reprinting/ republishing this material for advertising or promotional purposes, creating new collective works for resale or redistribution to servers or lists, or reuse of any copyrighted components of this work in other works

CitationsWeb of Science® Times Cited: 1

    Research areas

  • Bayesian inference, Sequential Monte Carlo, Markov Chain Monte Carlo, Strategic bidding
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