Bi-Level Strategic Bidding Model of Gas-fired Units in Interdependent Electricity and Natural Gas Markets
Tao Jiang, Chenguang Yuan, Linquan Bai, Badrul Chowdhury, Rufeng Zhang, Xue Li
Abstract
The increasing penetration of renewables tends to demand more flexibility from gas-fired units to maintain system reliability, which significantly strengthens the interdependency between the electricity and the natural gas markets. To this end, intra-day gas market trading may be necessary, and a completely deregulated natural gas market may emerge in the future. As the interdependency between the electricity and the natural gas markets keeps growing, this paper proposes a bi-level strategic bidding model to study the market behaviors of the gas-fired unit, which simultaneously acts as a strategic power producer in the electricity market and a strategic gas buyer in the natural gas market. The upper-level problem maximizes the profit of the gas-fired unit, and the two lower-level problems respectively model the market-clearings of the electricity and the natural gas markets. The upper and lower levels interact through locational marginal prices of electricity and natural gas. The proposed bi-level optimization model is converted to a mathematical problem with equilibrium constraint (MPEC). Then it is transformed into a mixed-integer second-order-cone programming (MISOCP) for efficient calculation. Numerical results demonstrate the proposed methodology is capable of mimicking the market-clearing process and strategic behaviors of the gas-fired unit in the interdependent energy markets effectively.