This paper considers a profit-maximizing thermal unit producer that participates in a day-ahead market.
The producer behaves as a price-taker in the day-ahead electricity market. This paper provides the information gap decision theory for determining the optimal bidding strategies for the day-ahead market.
While making bidding strategy, factors such as characteristics of the generator and market price uncertainty need to be considered as they have direct impact on the expected profit and bidding curve. In this
paper, a method of building an optimal bidding strategy is presented under market price uncertainty
using information gap decision theory (IGDT). Information gap decision theory is a non-probabilistic
decision theory that seeks to optimize robustness to failure – or opportunity to windfall – under severe
uncertainty. It is shown that risk-aversion and risk-taker may influence the expected profit and bidding
curve of a producer. The proposed method is illustrated through a realistic case study.