SDP relaxation for a strategic pricing bilevel problem in electricity markets

We consider a strategic bidding problem under uncertainty in a wholesale energy market, where the economic remuneration of each generator depends on the ability of its own management to submit price and quantity bids. We present a bilevel formulation for the problem and propose semidefinite programming (SDP) relaxations for it. The SDP relaxations are compared in order to measure the trade-off between their strength and the computational effort required to solve them. Numerical results are shown for case studies with configurations derived from the Brazilian system.

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