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Bidding Strategy in Financial Transmission Right Market

Author: ZengDan
Tutor: YanZheng
School: Shanghai Jiaotong University
Course: Proceedings of the
Keywords: FTR ARR Bidders Bidding strategy Risks LMP East China Power Market
CLC: F724.59
Type: Master's thesis
Year: 2010
Downloads: 38
Quote: 0
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Abstract


Financial transmission right is not only an important instrument for hedging congestion charges, but also a risk management tool for bidders. Auction revenue right (ARR) is a financial instrument as similarly as FTR, which will be allocated to the fixed network services. Those bidders will participate in the annual financial transmission right. According to locational marginal price (LMP) and incomplete information on the other bidders, the competition among bidders for transmission rights is modeled as an incomplete information game. Bidder will face a certain degree of market risk, requires a corresponding bidding strategy to reduce risk, maximize benefits, while ensuring transmission capacity and long-term planning to provide the correct price competition.According to the financial transmission right market in East China power market, this paper analyze the relationship between LMP and bidding strategy in FTR and ARR market, and get the closely matched FTR auction results. Based on the trade varieties, auction model and methods of surplus distribution according to the realistic condition of East China power market, supposing the forecasted distribution of LMP differences and bidders’risk preferences are known to respective bidders, the FTR bidding problem is modeled as a bilevel optimization with the upper sub-problem representing bidders and the lower sub-problem representing the solution to the ISO’s FTR market clearing problem for maximizing the revenues collected from the FTR auction. Moreover, there are two kinds of FTR products in the FTR market which includes obligation FTR and option FTR. Participants can choose from them according to their demand to avoid the congestion risks. A simplified model of East China Power Grid, for example, a detailed analysis of each of the annual FTR trading market, and monthly FTR market, different types of FTR and forecasting accuracy to the market participants bid price impact.Finally, this paper takes the reduced East China power grid as an example to analyze the impact of contingency constraints, forecasted LMP differences, and bidders’preferred risk levels on FTR bidding strategies with different types of FTR in annual FTR market and monthly FTR market.

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CLC: > Economic > Trade and Economic > China's domestic trade and economic > Circulation of commodities > Auction
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