Efficient management of interconnected power systems: A game-theoretic approach

The optimal management over a one year planning horizon, of two interconnected hydro-thermal power systems is considered. The optimal production in each system is modelled as a stochastic control problem whose solution is searched in a particular class of control strategies. The efficient exchange of energy between the two systems and its pricing are viewed as a cooperative game and the Nash-Harsanyi bargaining solution is characterized. Various information structures for the exchange and price strategies are discussed and it is shown that, in all cases, the price strategy is equivalent to the definition of a compensatory side payment which equalizes the advantages accruing to each of the two players with respect to a status quo situation where no interconnection is available. A numerical illustration based on a typical European power system is presented to assess the potential gain when using a closed loop exchange strategy instead of an open loop one.