Optimal Offer Construction in Electricity Markets

Abstract

In this paper we study strategies for generators making offers into electricity markets in circumstances where both the demand for electricity and the behaviour of competing generators is unknown but can be represented by a probability distribution. Given this probability distribution, we derive necessary optimality conditions for a broad class of supply offer curves. We show how these conditions can be used to construct an optimal solution for a simple example. We also consider the case in which a generator is restricted in the number of prices at which power can be offered.