Results

To see how the GenCos learn their bidding strategies in the two markets, the same three bus grid was used as in the analytical model presented above. Additionally, to study the effects of spatial location on a GenCo’s bidding strategies, we imposed thermal limit on one transmission

line at a time. The action sets for the two GenCos were selected as reported earlier and the bidding strategies were obtained using the process described in section. The process was run 50 times.

Case 1: Thermal Limit on Line 1 → 3

The bidding strategies for the two GenCos, in FTR and DA markets, when thermal limit

is imposed on line 1 → 3 are shown in Fig. 4.4.3. The end points of the blue vertical line

represent bidding strategies of GenCo1 in the FTR auction and DA market, respectively for one particular run. The results show that GenCo1 reports true or lower than true marginal cost of production in 48 out of the 50 runs.

In general, a GenCo with low marginal cost of production will be dispatched before a GenCo

with higher marginal cost14. Hence, by reporting lower than true marginal cost as the energy

supply offer, GenCo1 raises the chance of getting dispatched to provide energy.

Also, 1MW power injection by GenCo1 at bus 1 causes twice as much power flow on transmission line 1 → 3 as compared to 1MW power injection by GenCo2. Hence, GenCo1 causes thermal limit constrained line 1 → 3 to become congested faster than GenCo2.

Finally, given that there is no production capacity limit on either GenCo, the LMPs at their respective buses (if they are dispatched) reflect the marginal costs of production of the last unit of power produced by the GenCos. Hence, a low marginal cost reported by GenCo1 implies lower LMP at its bus compared to what the LMP would be, if the GenCo had reported true marginal cost as its energy supply offer. This implies that the GenCo is willing to take losses from its energy sales. However, low LMP at bus 1 also implies that the LMP differentials

are higher, for instance, LM P3− LM P1 increases as LM P1 decreases. Thus, the payoff from

GenCo1’s FTR portfolio increases if the LMP differentials increase.

If GenCo1 is able to “create” enough revenues from its FTR portfolio to offset the losses from energy sales, then the logical strategy in FTR auction is to bid high price, in order to

secure as many of the desirable FTRs. We can see from Fig. 4.4.3 that GenCo1 ALWAYS

selects high action choice in the FTR market. Hence, it can be concluded that GenCo1 is able 14

In certain cases of grid congestion patterns, low cost GenCo might be able to be dispatched before the higher cost GenCo.

to learn to utilize its locational advantage i order to maximize the combined payoffs from the two revenue sources.

0 5 10 15 20 25 30 35 40 45 50 0 1 2 3 4 5

6 Gen 2 FTR and DA Market Choices w/ Thermal Limit on Line 13

Run

Action Choices (FTR, DA)

DA Market FTR Market 0 5 10 15 20 25 30 35 40 45 50 0 1 2 3 4 5

6 Gen 1 FTR and DA Market Choices w/ Thermal Limit on Line 13

Run

Action Choices (FTR, DA)

DA Market FTR Market

:  High  Ac)ons  

4,5   Black  Line:  True  Ac)on   1,2   :  Low  Ac)ons  

Gen  1  Ac)on  Choices   Gen  2  Ac)on  Choices   DA  Market  Ac)on  Choice  

FTR  Market  Ac)on  Choice  

5   4   3   2   1   5   4   3   2   1  

Figure 4.9 GenCo1 and GenCo2 Action Choices when Thermal Limit on line 1 → 3

GenCo2, on the other hand, does no gain much from reporting low marginal cost as its energy supply offer in the DA market, and its dominant strategy is to report true or higher than true marginal cost of production. Consequently, GenCo2 is not able to create simlar LMP differentials due to the higher LMP at bus 2, and so, it does not gain much from a bigger portfolio of FTRs. We can see that GenCo 2 has no clear or dominant strategy to submit demand bids in the FTR auction.

Case 2: Thermal Limit on Line 1 → 2

The action choices of the GenCos in FTR auction and DA market, when thermal limit is

imposed on line 1 → 2, are shown in Fig. 4.4.3. It is clear that both GenCos choose to report

true or higher than true marginal cost of production as their supply offers. Consequently, the LMPs at their respective buses are also high, and hence, the LMP differences are not high enough to increase the payoffs from FTR portfolios. We can see that the GenCos have no clear dominant strategy to submit demand bids in FTR auction, as can be seen from the results.

0 5 10 15 20 25 30 35 40 45 50 0 1 2 3 4 5

6 Gen 1 FTR and DA Market Choices w/ Thermal Limit on Line 12

Run

Action Choice (FTR, DA)

FTR Market DA Market 0 5 10 15 20 25 30 35 40 45 50 0 1 2 3 4 5

6 Gen 2 FTR and DA Market Choices w/ Thermal Limit on Line 12

Run

Action Choice (FTR,DA)

DA Market FTR Market

:  High  Ac)ons  

4,5   Black  Line:  True  Ac)on   1,2   :  Low  Ac)ons  

Gen  1  Ac)on  Choices   Gen  2  Ac)on  Choices   DA  Market  Ac)on  Choice  

FTR  Market  Ac)on  Choice  

5   4   3   2   1   5   4   3   2   1  

Figure 4.10 GenCo1 and GenCo2 Action Choices when Thermal Limit on line 1 → 2