Incorporating Non-Convex Operating Characteristics into Bi-Level Optimization Electricity Market Models

Yujian Ye, Dimitrios Papadaskalopoulos, Jalal Kazempour, Goran Strbac

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Abstract

Bi-level optimization constitutes the most popular mathematical methodology for modeling the deregulated electricity market. However, state-of-the-art models neglect the physical non-convex operating characteristics of market participants, due to their inherent inability to capture binary decision variables in their representation of the market clearing process, rendering them problematic in modeling markets with complex bidding and unit commitment (UC) clearing mechanisms. This paper addresses this fundamental limitation by proposing a novel modeling approach enabling incorporation of these non-convexities into bi-level optimization market models, which is based on the relaxation and primal-dual reformulation of the original, nonconvex lower level problem and the penalization of the associated duality gap. Case studies demonstrate the ability of the proposed approach to closely approximate the market clearing solution of the actual UC clearing algorithm and devise more profitable bidding decisions for strategic producers than the state-of-theart bi-level optimization approach, and reveal the potential of strategic behavior in terms of misreporting non-convex operating characteristics.
Original languageEnglish
JournalIEEE Transactions on Power Systems
Volume35
Issue number1
Pages (from-to)163 - 176
ISSN0885-8950
DOIs
Publication statusPublished - 2019

Keywords

  • Bi-level optimization
  • Electricity markets
  • Non- convexities
  • Strategic bidding
  • Unit commitment

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