Bidding Strategy in Spot Markets with Definition of a New Market Power Index by Using Conjectural Variation

In this paper, the concept of Conjectural Variation (CV) is used to specifyoptimal generation decision for generation companies (Gencos). Theconjecture of Genco is defined as its belief or expectation about thereaction of rivals to change of its output. Using CV method, each Gencohas to learn and estimate strategic behaviors of other competitors fromavailable historical market operation data. Therefore, accuracy ofgeneration decision depends on the accuracy of estimating othercompetitors’ decision within CV context.In this paper, adjusted Lerner index is used to improve the accuracy ofestimating CV parameter. In electricity market, the adjusted Lerner indexcan be directly computed using price, market shares, marginal cost andindustry elasticity of demand. It must be noted that due to repeatedpower market, Gencos need to modify their behavior over time. Inresponse to this need, dynamic learning is considered in case studieswhich improve results

Keywords:

Power market , Conjectural Variation , Adjusted Lerner index , Bidding strategy