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Strategic offering of a flexible producer in day-ahead and intraday power markets

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  • Rintamäki, Tuomas
  • Siddiqui, Afzal S.
  • Salo, Ahti

Abstract

The increase in intraday electricity market volumes due to intermittent renewable generation may give a strategic producer an opportunity to exert market power. We study offering strategies of a flexible producer in day-ahead and intraday markets using a bi-level model in which the upper level represents the profit-maximization problem of the producer and the lower-level problems clear the day-ahead and intraday markets sequentially. Using a three-node network, we first demonstrate that a flexible producer with perfect forecasts can increase its profit in both markets by coordinating its offer so as to cause transmission grid congestion or lack of competitive generation capacity. Moreover, we show that strategic behavior is possible even when the day-ahead and intraday markets are cleared simultaneously to lower balancing costs. We next assess these market designs in a Nordic test network and offer an explanation for high Nordic intraday prices. Finally, via an annual simulation using the Nordic market data, we verify that strategic offering in day-ahead and intraday markets under imperfect forecasts leads to increased profits vis-à-vis perfect competition but are mitigated through simultaneous market clearing.

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  • Rintamäki, Tuomas & Siddiqui, Afzal S. & Salo, Ahti, 2020. "Strategic offering of a flexible producer in day-ahead and intraday power markets," European Journal of Operational Research, Elsevier, vol. 284(3), pages 1136-1153.
    • Handle: RePEc:eee:ejores:v:284:y:2020:i:3:p:1136-1153
    DOI: 10.1016/j.ejor.2020.01.044
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    2. Liu, Chen & Shao, Zhen & Jiao, Jianling & Yang, Shanlin, 2024. "How connected is withholding capacity to electricity, fossil fuel and carbon markets? Perspectives from a high renewable energy consumption economy," Energy Policy, Elsevier, vol. 185(C).
    3. Micha{l} Narajewski & Florian Ziel, 2021. "Optimal bidding in hourly and quarter-hourly electricity price auctions: trading large volumes of power with market impact and transaction costs," Papers 2104.14204, arXiv.org, revised Feb 2022.
    4. Yang, Yan-Shen & Xie, Bai-Chen & Tan, Xu, 2024. "Impact of green power trading mechanism on power generation and interregional transmission in China," Energy Policy, Elsevier, vol. 189(C).
    5. Bjørndal, Endre & Bjørndal, Mette Helene & Coniglio, Stefano & Körner, Marc-Fabian & Leinauer, Christina & Weibelzahl, Martin, 2023. "Energy storage operation and electricity market design: On the market power of monopolistic storage operators," European Journal of Operational Research, Elsevier, vol. 307(2), pages 887-909.
    6. Hohl, Cody & Lo Prete, Chiara & Radhakrishnan, Ashish & Webster, Mort, 2023. "Intraday markets, wind integration and uplift payments in a regional U.S. power system," Energy Policy, Elsevier, vol. 175(C).
    7. Zhong, Zhiming & Fan, Neng & Wu, Lei, 2023. "A hybrid robust-stochastic optimization approach for day-ahead scheduling of cascaded hydroelectric system in restructured electricity market," European Journal of Operational Research, Elsevier, vol. 306(2), pages 909-926.
    8. Devine, Mel T. & Siddiqui, Sauleh, 2023. "Strategic investment decisions in an oligopoly with a competitive fringe: An equilibrium problem with equilibrium constraints approach," European Journal of Operational Research, Elsevier, vol. 306(3), pages 1473-1494.
    9. Lan, Liuhan & Zhang, Xingping & Zhang, Youzhong, 2023. "Low carbon and efficiency oriented day-ahead joint electrical energy and ancillary services market clearing model for generation-side in China," Energy Economics, Elsevier, vol. 121(C).
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    11. Koolen, Derck & Huisman, Ronald & Ketter, Wolfgang, 2022. "Decision strategies in sequential power markets with renewable energy," Energy Policy, Elsevier, vol. 167(C).
    12. Narajewski, Michał & Ziel, Florian, 2020. "Ensemble forecasting for intraday electricity prices: Simulating trajectories," Applied Energy, Elsevier, vol. 279(C).

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