Game Theory Application and Strategic Bidding in Electricity Supply Market

Abstract

This paper introduced the application of game theory in electricity power market. Moreover, the electricity pool model and the merit order dispatch method was in-troduced. In pool mode, participants are trying to maximize their benefit via compe-tition with each other. Hence the market can be regarded as a non-cooperative game, especially, the electrical supply competition. Players (generators) could use strategic bidding to occupy advantages in competition. The bidding strategies of generators in electricity pool model were researched via build a 3-generator competition model. Moreover, Nash Equilibrium idea was used to explore generator’s optimal bidding strategy. The results show when players are in Nash Equilibrium; thestrategy is their optimal bidding strategy.