BIDDING WIND POWER IN SHORT-TERM ELECTRICITY MARKET BASED ON MULTIPLE-OBJECTIVE FUZZY OPTIMIZATION Yaosuo Xue, Bala Venkatesh, and

Liuchen Chang Department of Electrical and Computer Engineering University of New Brunswick Fredericton, New Brunswick, Canada Email: y.x@unb.ca, venkat@unb.ca, and lchang@unb.ca
ABSTRACT Wind energy is promising with no fuel cost and zero greenhouse gas emissions; however, its intermittent and volatile nature has added much to operation burdens and thus a low penetration level in short-term or spot market. On the one hand, the power system operator is facing increased spinning reserve and generation uncertainty; on the other hand, the wind independent power producer (IPP) is subject to imbalance penalties in the balancing market. Previous literatures solely focused on maximizing the profit for a wind IPP formulating optimal bidding strategies without the consideration of operator side. This paper proposes a multiple-objective optimal bidding strategy to achieve both wind IPPs maximum profit and less challenge for the operator. The strategy is formulated as a mixed-integer linear programming (MILP) problem with fuzzy optimization techniques. Analytic and numerical solutions will be given with discussion on risk control. Index Terms Optimal bidding strategy, wind power, fuzzy optimization, mixed-integer linear programming 1. INTRODUCTION With the power industry deregulated in North America since 1992, small and renewable distributed generators, like wind turbine generator (WTG) systems or wind farms, are allowed to feed power into utility grid. As a reward, the WTG owner can obtain or offset his bill at the avoided cost of utility according to an earlier practice called Netmetering protocol. With more state/provincial jurisdictions introducing Renewable Portfolio Standards (RPS), wind power has participated in wholesale electricity market, mostly in the form of bilateral transactions or future market. It is generally stated that wind power itself is nondispatchable due to the stochastic behaviour of wind, and can bring power system operation challenges in short-term forward market. Nevertheless, many regional transmission organizations or system operators have proposed the Demand Response programs, which encourage the consumer and distributed generators to bid into day-ahead
CCECE/CCGEI May 5-7 2008 Niagara Falls. Canada 978-1-4244-1643-1/08/$25.00 2008 IEEE

market and to enjoy real-time market price, for peakshaving and new generation and transmission deferment. Wind generators face potential imbalance penalties for the generation outside of their schedule when attending the day-ahead market bidding. Under FERC Order No. 888, several ISOs have applied the harsh balancing market rules to wind generators [1]. As a result, wind power producer is striving to achieve maximum net profit in dayahead market. Although wind power forecasts can help provide first-hand bidding data, their accuracies are subject to prediction horizon from several hours up to 36 hours. Therefore, wind power producers are willing to take the chance of optimal bidding strategies, which may help them reduce prediction uncertainty, control market risk, and to some extent maximize their profits. A few optimal bidding strategies have been proposed in [2-7] for wind energy trading in short-term market. Bathurst et al. [2] proposed a Markov-like method minimizing the expected imbalance cost to decide the best wind energy contract level, where probability table is required for each hour in terms of current energy band, various forecast delay, and 11 future energy bands. Fabbri et al. [3], Usaola et al. [6], and Pinson et al. [7] all proposed strategies based on the probability density function of wind power prediction to account for the uncertainty of forecast errors. Matevosyan et al. [5] utilized the ARMA model simulating scenarios of wind speed forecast errors and formulated a nonlinear mixed-integer programming problem. Galloway et al. [4] discussed various risk assessment methods and proposed that the utility function strategy is more effective than expected value and mean-variance methods. Aforementioned authors adopted single objective function, which may result in multiple solutions or gaming bids in case the imbalance price is equal to spot price. Realizing the point, this paper will propose a multipleobjective optimal bidding strategy, formulate it in a mixedinteger linear programming (MILP) problem, and solve it in a fuzzy optimization framework. Probabilistic forecasts are utilized and the bidders attitude towards risk is modeled depending on his confidence and knowledge to forecast.

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2. DAY-AHEAD BIDDING MECHANISM Unlike bilateral transactions, day-ahead market is a shortterm forward trading market. In a single-sided bid market, only suppliers attend bidding; whereas in a double-sided market, both suppliers and consumers can bid into market. The market clearing price (MCP) mechanism has two types, uniform pricing and pay-as-bid pricing; however, most of electricity markets adopt uniform pricing where every accepted bidder will be paid by the price of marginal bid block regardless of their bidding price. Wind power is generally regarded as a price taker. It is often not allowed for wind power producer to bid multiple price/quantity (P/Q) pairs like fossil fueled generators. From this aspect, optimal bidding strategies for wind power deal more with quantity uncertainty, while the optimal bidding strategies for conventional generators mainly focus on price uncertainty and other bidders information. The market participants are required to submit 24 hours dispatch P/Q data before certain time, e.g. 12pm. In some markets, they can submit revised data in day ahead or intraday every 4 hours. After certain time in day ahead, e.g. 3pm, market is cleared and each participant is confirmed with price and contracted level. At 0:00h on delivery day, market participants start to deliver scheduled generation. On the delivery day, individual power producers generation imbalance is settled in balancing market, which is calculated every 5 minutes or longer. 3. OPTIMAL BIDDING PROBLEM FORMULATION Since wind power is random and cannot be hedged without additional energy storage, there is no manipulation among different hours. In the following problem, we will only formulate an hourly bidding problem. Solving the problem with 24-hour forecast data individually will give a complete day-ahead bidding scheme. The hourly spot price ( c ), the credit for overproduction ( c ), and the penalty for underproduction ( c ) are considered to be given data, which can be derived from historical data or separate prediction models. We dont consider the case when overproduction is penalized in this formulation. Although different imbalance price models exist depending on different market regulation rules, a reasonable relation among these prices can be simply expressed in the following inequation.
+

Fig. 1. An example of wind power probabilistic forecasts. We formulate the problem in a multiple-objective approach, maximizing revenue z1 and minimizing the expected imbalance cost z2, as follows: max z1 = cPb
Pb

min z2 = E [ Z 2 ] = m pm
P b m =1

( P P )c + , if Pb Pm where m = b m ( Pb Pm )c , if Pb > Pm subject to 0 Pb Pmax where Pb is the decision variable for the aggregated wind power of a wind farm or multiple WTGs, and Pm , pm are the m-th segment or band forecasted power and probability, respectively.
3.2. Mixed-Integer LP Formulation The initial problem is converted to a MILP problem to be able to use an optimization package, such as Mosek, to solve it. The MILP formulation is given by Equ. (1) to (8). max . z1 = cPb (1)
+ min. z 2 = (d m c + + d m c ) pm m =1 M

(2)

subject to
+ d m U m ` + ( Pb Pm ), m = 1, 2, ..., M

(3) (4) (5) (6) (7) (8)

0 c + c c
3.1. Initial Problem Wind power is considered to be a nonlinear and bounded random process [7]. An hourly probabilistic forecast histogram, such as one shown in Fig. 1, is assumed to be available for the bidder.

d (1 U m )`, d Pb Pm , d 0, 0 Pb Pmax 0 U m 1,
m m

+ m

m = 1, 2, ..., M m = 1, 2, ..., M m = 1, 2, ..., M m = 1, 2, ..., M

where U m is integer only, and ` is a relatively large negative constant compared to Pmax , e.g. -106 .

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+ d m and d m are dependent variables introduced to deal with the conditional expressions in the original problem.

4. ANALTICAL SOLUTION

3.3. Fuzzy MILP Formulation

For the forecast with small number of segments, optimal solution can be found analytically.

z1 ( Pb ) = z 2 ( Pb ) Pb = Pb*
That is

To solve the multiple-objective problem, fuzzy optimization technique is applied. We will only convert two crisp objective functions into fuzzy objective functions in terms of membership function. Then we introduce a variable = min( z1 , z 2 ) and maximize this variable. First we define the decision variable vector as:
X = Pb where D+ = d1+ D+
+ d2

Z1 ( Pb ) Z1 Z 2 Z 2 ( Pb ) = Z1 Z1 Z2 Z2
This will lead to Z1 ( Pb ) + Z 2 ( Pb ) = Z1 + Z 2
where = (9)

D U
+ ... d M

D = d1 d 2 ... d M U = [U1 U 2 ... U M ]

The fuzzy set for z1 and z2 are defined as follows. Z1 = {[ z1 ( X ), z1 ( X ) ] , Z1 z1 ( X ) Z1}

Z 2 = {[ z2 ( X ), z 2 ( X )] , Z 2 z2 ( X ) Z 2 }
M + + m m =1

Z1 Z1 Z2 Z2 For one point forecast, there will be 2 equations in (9); for two points forecast, there will 3 equations in (9). Given the bidding upper bound and lower bound, above equations can be solved to find the optimal bidding power after abandoning the improper solutions, which are inconsistent with the conditions.
5. CASE STUDY - NUMERICAL AND GRAPHICAL SOLUTIONS

where z ( X ) = cX 1

z2 ( X ) = (d c + d c ) pm
m

Their membership functions are defined to be linear in the following, which is also shown in Fig. 2.
z1 ( X ) =
z1 ( X ) Z1 Z1 Z1

z2 ( X ) =

Z 2 z2 ( X ) Z2 Z2
M m =1 M

where Z1 = c( Pmax ) Z1 = c( Pmax )

Z 2 = c+ ( Pmax Pm ) pm Z 2 = c ( Pmax Pm ) pm
m =1

Mosek optimization software is used to solve for the numerical solutions for two cases. Case 1 has a 10-band probabilistic forecast for a 100MW wind farm and Case 2 has a 20-band forecast. Fig. 3 illustrates the forecasted power histograms for both cases.
0.2 0.18 0.16 0.14 Probability 0.12 0.1 0.08 0.06 0.04 0.02 0 5 15 25 35 45 55 Power, MW 65 75 85 95

0 1.0 and 0 1.0

0.14

Fig. 2. Membership functions for revenue and penalty.

0.12

Parameters and can model the bidders attitude

Probability

0.1 0.08 0.06 0.04 0.02 0 0

towards risk. A flat choice is = 0 and = 1.0 . The final formulation is depicted as:
maximize
X

subject to

z1 ( X ) z 2 ( X )
constraints ( 3) ~ ( 8 )

20

40 60 Power, MW

80

100

Fig.3. Histogram of wind power forecast. (Top: 10-band forecast, Bottom: 20-band forecast)

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Table 1. Optimal bidding level for 10-band forecast case.

~
0.0 ~ 1.0 0.1 ~ 0.9 0.2 ~ 0.8 0.3 ~ 0.7 0.4 ~ 0.6

Pb*
59.0 56.1 53.1 50.2 47.7

E[Z1 wZ 2 ]
$ 1045 $ 994 $ 974 $ 954 $ 941

w
0.60 0.65 0.67 0.69 0.70

Table 2. Optimal bidding level for 20-band forecast case.

The market price is $30/MWh, the overproduction is rewarded at $10/MWh, and the underproduction is charged at a cost of $60/MWh. Table 1 and Table 2 present the optimal results for various choices of bidding range. The expected profits considering a weighted imbalance cost are also shown in both tables. From the table, we found a wide bidding range is more risky but with more expected profits. Fig. 4 demonstrates the graphical solution for Case 2. The crisp optimization curves are also shown to compare with the fuzzy optimization results.
6. CONCLUSION

~
0.0 ~ 1.0 0.1 ~ 0.9 0.2 ~ 0.8 0.3 ~ 0.7 0.4 ~ 0.6
3000

Pb*
62.2 59.2 56.0 52.7 49.2

E[Z1 wZ 2 ]
$ 1341 $ 1324 $ 1314 $ 1275 $ 1263
1 0.9 0.8

w
0.65 0.68 0.70 0.78 0.82

Crisp Optim ization Rev enue Weighted Penalty Expected Profit

Fuzzy O ptim ization R enue ev Penalty

2500 R evenue, Im balance Cost, & Profit ($)

2000 M bership Function em

0.7 0.6

Wind power producers are attracted to bid into short-term market; however, bidding based on point prediction may result in substantial imbalance cost to wind IPPs. Optimal bidding strategies based on probabilistic forecast can provide decisions for wind IPPs to account for forecast uncertainty and to control risk. This paper proposes a fuzzy optimization based optimal bidding strategy, aiming to both maximize the profit for wind IPPs and to alleviate the generation uncertainty for the system operator with less gaming. Future work includes the method validation using wind farm field data and further consideration of S-shaped or piecewise linear membership function.
7. REFERENCES

1500

0.5 0.4 0.3 0.2

1000

500

[1] M. Robinson, Role of balancing markets in wind integration, in Proc. IEEE PSCE06, Atlanta, Georgia, USA, Oct 29 Nov 1, 2006, pp. 232-233. [2] G.N. Bathurst, J. Weatherill, and G. Strbac, Trading wind generation in short term energy markets, IEEE Trans. Power Syst., vol. 17, no. 3, pp. 782-789, Aug 2002.
50 100 Bidding Pow Pb (MW) er,
Fuzzy O ptimization

0 0.1 -500 0 0 0

50 100 Bidding Pow Pb (MW) er,

C risp O ptimization

3000

2500 R evenue, Imbalance C ost, & Profit ($)

R enue ev Weighted Penalty Expected Profit

1 R enue ev Penalty 0.8 Membership Function

[3] A. Fabbri, T.G.S. Romn, J.R. Abbad, and V.H.M. Quezada, Assessment of the cost associated with wind generation prediction errors in a liberalized electricity market, IEEE Trans. Power Syst., vol. 20, no. 3, pp. 1440-1446, Aug 2005. [4] S. Galloway, G. Bell, G. Burt, J. McDonald, and T. Siewierski, Managing the risk of trading wind energy in a competitive market, IEE Proc. Gener. Transm. Distrib., vol. 153, no. 1, pp. 106-114, Jan 2006. [5] J. Matevosyan and L. Sder, Minimization of imbalance cost trading wind power on the short-term power market, IEEE Trans. Power Syst., vol. 21, no. 3, pp. 1396-1404, Aug 2006. [6] J. Usaola and J. Angarita, Bidding wind energy under uncertainty, in Proc. Int. Conf. Clean Elec. Power (ICCEP07), Capri, Italy, May 21-23, 2007, pp. 754-759.

2000

1500

0.6

1000

0.4

500 0.2 0

-500 0

50 100 Bidding Pow Pb (MW er, )

0 0

50 100 Bidding Pow Pb (MW er, )

Fig. 4. Graphical solutions for 20-band forecast case. (Top: = 0, = 1.0 , Bottom: = 0.3, = 0.7 )

[7] P. Pinson, C. Chevallier, and G.N. Kariniotakis, Trading wind generation from short-term probabilistic forecasts of wind power, IEEE Trans. Power Syst., vol. 22, no. 3, pp. 1148-1156, Aug 2007.

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