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Bi-level optimization and reinforcement learning (RL) constitute the state-of-the-art frameworks for modeling strategic bidding decisions in deregulated electricity markets. However, the former neglects the market participants’ physical non-convex operating characteristics, while conventional RL methods require discretization of state and/or action spaces and thus suffer from the curse of dimensionality. This paper proposes a novel deep reinforcement learning (DRL) based methodology, combining a deep deterministic policy gradient (DDPG) method with a prioritized experience replay (PER) strategy. This approach sets up the problem in multi-dimensional continuous state and action spaces, enabling market participants to receive accurate feedback regarding the impact of their bidding decisions on the market clearing outcome, and devise more profitable bidding decisions by exploiting the entire action domain, also accounting for the effect of non-convex operating characteristics. Case studies demonstrate that the proposed methodology achieves a significantly higher profit than the alternative state-of-the-art methods, and exhibits a more favourable computational performance than benchmark RL methods due to the employment of the PER strategy. [ABSTRACT FROM AUTHOR]

Bi-level optimization constitutes the most popular mathematical methodology for modeling the deregulated electricity market. However, state-of-the-art models neglect the physical non-convex operating characteristics of market participants, due to their inherent inability to capture binary decision variables in their representation of the market clearing process, rendering them problematic in modeling markets with complex bidding and unit commitment (UC) clearing mechanisms. This paper addresses this fundamental limitation by proposing a novel modeling approach enabling incorporation of these non-convexities into bi-level optimization market models, which is based on the relaxation and primal-dual reformulation of the original, non-convex lower level problem and the penalization of the associated duality gap. Case studies demonstrate the ability of the proposed approach to closely approximate the market clearing solution of the actual UC clearing algorithm and devise more profitable bidding decisions for strategic producers than the state-of-the-art bi-level optimization approach, and reveal the potential of strategic behavior in terms of misreporting non-convex operating characteristics. [ABSTRACT FROM AUTHOR]

The envisaged decarbonisation of electricity systems has attracted significant interest around the role and value of energy storage systems (ESSs). In the deregulated electricity market, there is a need to investigate the complex impacts of ESSs, considering the potential exercise of market power by strategic players. This study aims at comprehensively analysing the impacts of both price‐taking and price‐making storage behaviours on energy market efficiency, corresponding to potential settings with small and large storage players, respectively. In order to achieve this and in contrast to previous papers, this work develops a multi‐period equilibrium programming market model to determine market equilibrium stemming from the interactions of independent strategic producers and ESSs, while capturing the time‐coupling operational constraints of ESSs as well as network constraints. The results of case studies on a test market capturing the general conditions of the GB electricity system demonstrate that the introduction of ESSs mitigates market power exercise and improves market efficiency, with this beneficial impact being higher when ESSs act as price takers. When the electricity network is congested, the location of ESSs also affects the market outcome, with their beneficial impact on market efficiency being higher when they are located in higher‐priced areas. [ABSTRACT FROM AUTHOR]

Previous work on the role of the demand side in imperfect electricity markets has demonstrated that its self-price elasticity reduces electricity producers’ ability to exercise market power. However, the concept of self-price elasticity cannot accurately capture consumers’ flexibility, as the latter mainly involves shifting of loads’ operation in time. This paper provides for the first time theoretical and quantitative analysis of the beneficial impact of demand shifting (DS) in mitigating market power by the generation side. Quantitative analysis is supported by a multiperiod equilibrium programming model of the imperfect electricity market, accounting for the time-coupling operational constraints of DS as well as network constraints. The decision making process of each strategic producer is modeled through a bi-level optimization problem, which is solved after converting it to a Mathematical Program with Equilibrium Constraints (MPEC) and linearizing the latter through suitable techniques. The oligopolistic market equilibria resulting from the interaction of multiple independent producers are determined by employing an iterative diagonalization method. Case studies on a test market reflecting the general generation and demand characteristics of the GB system quantitatively demonstrate the benefits of DS in mitigating producers’ market power, by employing relevant indexes from the literature. [ABSTRACT FROM AUTHOR]

Uniform marginal pricing cannot generally support competitive equilibrium solutions in markets with non-convexities, yielding surplus sub-optimality effects. Previous work has identified non-convexities associated with the generation side of electricity markets and proposed different approaches to address surplus sub-optimality. This paper extends this concept to incorporate the demand side. Non-convexities of flexible demand (FD) are identified, including options to forgo demand activities as well as discrete and minimum power levels, and resulting surplus sub-optimality effects are demonstrated through simple examples and a larger case study. Generalized uplift and convex hull pricing approaches addressing these effects are extended to account for FD non-convexities. Concerning the former, generalized uplift functions for FD participants are proposed, and a new rule is introduced for equitable distribution of the total surplus loss compensation among market participants. Regarding the latter, it is demonstrated that convex hull prices are flattened at periods when FD is scheduled to eliminate surplus sub-optimality associated with the FD ability to redistribute energy requirements across time. [ABSTRACT FROM PUBLISHER]

• Local energy markets enable direct energy trading among participating customers. • The interactions among electricity retailers and local energy markets are modelled. • A novel approach is employed for solving the developed bi-level optimization model. • Local energy markets are shown to enhance the competitiveness of retailers. • Local energy markets are shown to increase the economic surplus of the customers. Local energy markets (LEM) have recently attracted great interest as they enable effective coordination of small-scale distributed energy resources (DER) at the customer side, and avoidance of distribution network reinforcements. However, the introduction of LEM has also significant implications on the strategic interactions between the customers and incumbent electricity retailers. This paper explores for the first time these interactions by proposing a novel multi-period bi-level optimization model, which captures the pricing decisions of a strategic retailer in the upper level (UL) and the response of both independent customers and the LEM (both including flexible consumers, micro-generators and energy storages) in the lower level (LL). Since the LL problem representing the LEM is non-convex, a new analytical approach is employed for solving the developed bi-level problem. The examined case studies demonstrate that the introduction of an LEM reduces the customers' energy dependency on the retailer and limits the retailer's strategic potential of exploiting the customers through large differentials between buy and sell prices. As a result, the profit of the retailer is significantly reduced while the customers, primarily the LEM participants and to a lower extent non-participating customers, achieve significant economic benefits. [ABSTRACT FROM AUTHOR]

Under the background of green certificate trading (GCT)‑carbon emission trading (CET) market, the application of P2P trading in regional integrated energy system (RIES) has not been fully explored, and it is urgent to design a reasonable prosumer P2P trading mechanism to adapt to the development of diversified electricity market. Therefore, this paper proposes a prosumer P2P cooperative trading model based on generalized Nash bargaining. Specifically, based on the differential modeling of various types of prosumers, this paper constructs a prosumer P2P cooperative trading model based on generalized Nash bargaining theory, and quantifies the bargaining power of prosumers through the contribution value of interactive operation. The GCT-CET collaborative mechanism is introduced to promote the consumption of distributed energy by transforming carbon quotas through green certificates. In addition, this paper designs a warm start and adaptive step alternating direction multiplier method decentralized algorithm (WAS-ADMM) to improve the solution efficiency and protect the trading privacy of prosumers. Through a case study, it analyzes the impact of prosumers' P2P cooperative trading on the consumption of distributed energy, prosumers' GCT-CET costs and comprehensive costs in the context of GCT and CET market. The simulation results show that the proposed trading model reduces the GCT-CET costs of the prosumers' alliance by about 24.98%. • A P2P cooperative trading model of integrated energy is constructed based on GNB. • A GCT-CET collaborative mechanism is proposed to promote the consumption of renewable energy. • An improved decentralized algorithm based on WAS-ADMM is designed to solve the P2P trading model. [ABSTRACT FROM AUTHOR]

• The long-term impacts of demand flexibility on deregulated systems are investigated. • Bi-level optimization model of a generation company's investment problem is proposed. • The proposed model captures energy shifting and reserve provision of flexible demand. • Different market design options around the allocation of reserve payments are tested. Demand flexibility has attracted significant interest given its potential to address techno-economic challenges associated with the decarbonisation of electricity systems. However, previous work has investigated its long-term impacts through centralized generation planning models which do not reflect the current deregulated environment. At the same time, existing market-based generation planning models are inherently unable to capture the demand flexibility potential since they neglect time-coupling effects and system reserve requirements in their representation of the electricity market. This paper investigates the long-term impacts of demand flexibility in the deregulated environment, by proposing a time-coupling, bi-level optimization model of a self-interested generation company's investment planning problem, which captures for the first time the energy shifting flexibility of the demand side and the operation of reserve markets with demand side participation. Case studies investigate different cases regarding the flexibility of the demand side and different market design options regarding the allocation of reserve payments. The obtained results demonstrate that, in contrast with previous centralised planning models, the proposed model can capture the dependency of generation investment decisions and the related impacts of demand flexibility on the electricity market design and the subsequent strategic response of the self-interested generation company. [ABSTRACT FROM AUTHOR]