December 2004
21
R. Rajaraman. “Optimal Bidding Strategies in Electricity Markets”
Optimal Bidding Strategy:
Energy and Reserve Prices Correlated
•
Energy and reserve prices are perfectly
correlated:
Ø
$40 Energy price => $12 reserve price
Ø
$35 Energy price =>$4 reserve price
•
Optimal strategy is:
Ø
Energy Market
o
Bid 60 MW of energy below $35
Ø
Reserve Market:
o
Bid 40 MW of reserves below $4
Ø
•
Expected profit from this strategy is $770