Decentralized Unit Commitment in Competitive Energy Markets
Abstract
In a competitive energy market, instead of, or in addition to, a centralized unit commitment, individual generation owners will make independent unit commitment decisions. They will seek to maximize their profits against the predicted market clearing price. Their unit commitment strategy will be expressed in their bids, so that they shut-down or start-up when the market price indicates such activity. In this chapter, we develop a unit commitment based price-taking (UCPT) bidding strategy with a simple price prediction mechanism and explore it using a market simulator. Simulation results show that an individual generator has higher profits with UCPT bidding than with simple price-taking bidding, and that the cost of supplying price-inelastic loads achieved by the market is lower when all generators use UCPT bidding. It appears that UCPT bidding gives results similar to those from a Lagrangian relaxation unit commitment (LRUC), without a fix-up step, and it has problems with convergence and feasibility similar to LRUC. We observe cyclic behavior in market prices with UCPT bidding, and we show that it depends on the price prediction mechanism. Alternative price prediction mechanisms can reduce cyclic behavior. Finally, we conceptually explore potential strategic behavior and market power arising from unit commitment constraints.
Keywords
Unit Commitment Bidding Strategy Market Clearing Price Future Profit Unit Commitment ProblemPreview
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