Study On The Algorithm Of The Equilibrium Strategies Of The Supply Chain In Mixed Pool/Bilateral Electricity Market

Liberalizing and reforming the power industry has become an inevitable trend.Mandatory separation of electricity generation, transmission and distribution broke up thevertically integrated supply chain, introducing competition into electricity markets. Themixed pool/bilateral market is a liberalization market which has been adopted in manycountries. Thus, it has become an important problem to study the equilibrium strategies ofthe supply chain in mixed pool/bilateral electricity market. We introduce the mixedpool/bilateral market structure and the transaction mechanism of the supply chain withoutconsidering transmission congestion. We formulate the mixed pool/bilateral market andderive the agents’ best strategies supposing that each of individual participants is rationaland seeks for his maximum profit. A novel dynamic algorithm is proposed for theimplementation of the equilibrium for supply chain coordination problems in electricitymarket, such that (i) Agents implement their best responses respectively in pool marketwith respect to contracts set in bilateral market;(ii) Agents implement the equilibriumbehavior in bilateral market with respect to the best responses of pool market implementedin (i). The procedure (i)–(ii) is repeated until no agents update their best strategies anylonger. By applying the proposed method, our work presents the advantage of the dynamicderivation of unique equilibrium of two-stage market, and verifies that, compared withonly-pool market, the presence of both bilateral contracts and pool market improves theperformance of electricity market with higher trading quantity, lower trading prices, highersocial welfare, and restraint of oligopolistic behavior of generator. Simulation example isused to illustrate the advantage of the dynamic derivation of unique equilibrium oftwo-stage market in the paper.