CHAPTER - 7

Firefly Algorithm based Strategic Bidding to Maximize

Profit of IPPs in Competitive Electricity Market

7.1 Introduction
The renovation of electric power systems plays a major role on economic and
reliable operation of power system. The generation companies and tail end customers
appears to undergo a major multiple task of designing of proper operating
methodologies. A significant amount of research work is in vogue in the past
pertaining to the market structure and to the development of optimal bidding
strategies. The tools supporting the bidding process seem to away from global
solution in view of the complexity and sizes of the practical problems. Therefore an
exhaustive formulation of optimal bidding strategy forays a contention of the
generation companies and the end consumers.

An innovative approach for defining optimal bidding strategy for Independent

Power Producers (single side action) is presented as a stochastic optimization problem
and solved by Firefly algorithm.(FA). The Firefly Algorithm is a Meta heuristic,
nature inspired, optimization algorithm which is based on the social flashing behavior
of fireflies and has been introduced for the bidding problem to obtain the global
optimal solution. It effectively maximizes the profit of power suppliers. The
numerical examples with Six generators (power suppliers) test system and a IEEE 30
bus system are considered to reveal the essential features of the proposed method and
test results tabulated. The simulation result shows that this approach effectively

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maximizes the Profit of Power suppliers, converge much faster and more reliable
when compared with the existing methods [132].

7.2 Problem formulation

7.2.1 Mathematical Model
Consider a system consist of m power suppliers participating in a pool-based
single-buyer electricity market in which the sealed auction with a uniform Market
Clearing Price (MCP) is employed and pictorially represented in Fig, 7.1. Assume
that each supplier is required to bid a linear supply function to the pool.

Fig. 7.1. A Typical Model of Electricity Market for Single side action

Fig. 7.2. Market Equilibrium Point for MCP

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 The i th supplier bid with linear supply curve is denoted by Gi ( Pi ) = ai + bi Pi
where i = 1, 2..m. The Pi is the active power, ai and bi are non-negative bidding
coefficients of the i th supplier. The Independent System Operator (ISO) receives bid
from all market participants and using predicted aggregate load from the small users,
the ISO determines MCP that attempts to balance the energy demand and Supply. The
process is graphically expressed in Fig. 7.2.

The objective of IPPs is to maximize their own profit. Suppose the power
producer i is expressed by cost function in equation (7.1)

2
Ci (Pi ) = ei Pi + f i Pi (7.1)

The objective function of power producer can be defined as in equation (7.2)

Max : F (ai , bi ) = RPi Ci ( Pi ) (7.2)

Market Clearing Price (R) is represented by the equation (7.3)

m
ai
Q0 +
i =1 bi
R= m
1
K +
i =1 bi
(7.3)
The aggregated load demand can be formulated as in equation (7.4)

Q( R ) = Qo KR (7.4)

Constraints
1. Power balance constraints:
m

P
i =1
i = Q(R) (7.5)

R ai
pi = i = 1, 2... m (7.6)
bi

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 2. Power generation limit constraints:

pi min pi pi max i = 1, 2... m (7.7)

7.2.2. Development of bidding strategy

The GENCOs may not have the possibility to know the exact information of
their competitor. Hence it is mandatory for a GENCO to understand the opponents
unknown information. It is assumed that the previous bidding coefficients are
available in public domain. The ith GENCO can therefore estimate the bidding
parameters using probability density function ( pdf ) obtained through statistical
analysis of historical bidding data.

Usually, pdf is used to represent the distribution of rivals bidding parameters

which can be expressed as in equation (7.8)

1 (x )2
pdf ( xi ) = exp i 2 i (7.8)
2 i 2 i

Where,
i - Standard deviation

i - Mean values

The bidding coefficients (ai , bi ) are dependent of each other. Hence one of the

co-efficient is kept constant and the other is arbitrarily chanced using pdf . The pdf of
a random variable is a formulation which can be integrated so as to get the probability
that the variable choose a value is a specified interval,

1
pdf ( a i , bi ) =
2 i
(a)
i( b ) 1 i2
a i i ( a )
2
2 i ( a i i( a ) )(bi i ) bi i( b )
(b )

2

1
exp 2 +
2(1 i ) i
(a)
i( a ) i( b ) i
(b )


(7.9)

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 (b)
Where i is the correlation co-efficient between ai and bi .The mean i(a ) , i

and standard deviation i(a ) , i(b ) are the parameters of the joint distribution. The
(b)
marginal distribution of ai , bi are normal with mean values i(a ) , i and standard

deviations i(a ) , i(b ) respectively. Based on historical bidding data these distributions
can be determined. The probability density function equation (7.9) represents the joint
distributions between ai and bi , the task of optimally coordinating the bidding
strategies for a supplier with objective function (7.2) and constraints (7.5) to (7.7),
becomes stochastic optimization problem. The Firefly algorithm is applied to solve
the above stochastic optimization problem.

7.3 Implementation of Firefly algorithm to solve Bidding problem

With a view to sell electricity at optimal prices and to maximize profit, the
power producers and consumers need exclusive bidding strategies that must consider
constraints such as Power balance, Generator limits and Load consumption limits of
market participants. The Firefly Algorithm can directly solve optimal bidding
problem (Maximize profit) because of its maximization characteristics and the flow
chart of the method is shown in Fig. 7.3. The Firefly Algorithm includes four essential
parameters, Population size (n), Attractiveness ( ), randomization parameter ( ) and
Absorption coefficient ( ).The feasible parameters obtained by iterative processes are
as follows. = 0.2 0.9, = 0.2 1.0, = 0.110 and n = 25 50. Therefore, the
following parameters of the proposed FA are considered to solve the optimal bidding
problem of six independent power producers and two large consumers. Where n = 30,
= 0.20, = 0.25, = 1 and the maximum number of iterations = 5000.

Owing to the random nature of the FA, their performance cannot be judged by
the result of a single run. Many trials with independent population initializations are

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necessitated to be made to obtain a useful conclusion of the performance of the
approach.
Start

Read system data, Generator data (Cost coefficients,

Generator limits), Aggregated load and Price Elasticity

Initialize the FA parameters: Population size (n).

Attractiveness ( ), randomization parameter ( ),
Absorption coefficient ( ) and number of iterations

Create the initial random population of bidding

co efficient (bi )

Using bidding coefficients calculate Market Clearing

Price ( R )
ai
Q 0 + i =1
m

bi
R=
m 1
K + i =1
bi

From MCP calculate fitness of each population

using the equation
Maximize : F (ai , bi ) = RPi Ci ( Pi )

Apply FA parameters to obtain the optimal

solution (Max profit)

No
Whether optimal
solution is reached
Yes

Print the profits of power suppliers

Stop

Fig.7.3. Flow chart for Profit Maximization of IPPs by Proposed method

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 The supremacy of the proposed FA, is brought out through the test results and
validated those reported in the recently published methods such as PSO, GA and
Conventional method for solving the bidding problem. The scenarios are programmed
in MATLAB 9.0 and simulation carried on a computer with a Pentium IV, Intel Dual
core 2.2 GHz, 2 GB RAM.

7.4 Case study and Results

The GENCOs build optimal bidding strategies to maximize the profit of power
suppliers and implements the modeling. The simulation is carried out on two cases of
test system. The first system consists of Six power suppliers as Case- I and second test
system of IEEE 30 bus as Case-2.

Test case: 1 (Six power suppliers Test System)

The proposed Firefly approach is applied to a test system given in [122] which
consists of six power suppliers. The cost coefficients of power generation and
maximum/ minimum limits of six power suppliers are mentioned in appendix A.9
(Table A.9.1).

Table 7.1 Simulation Results for Six Power suppliers

Bidding Strategy Bidding Profit

GENCOs ($/MW) Power(MW) ($)
1 0.0138 158.6641 238.9235
2 0.0490 50.0000 78.7500
3 0.0837 34.2130 76.6493
4 0.0147 71.3485 66.4166
5 0.0463 25.8886 26.0396
6 0.0463 25.8886 26.0376
Total profit ($) 512.8166
Market clearing price ($/h) 4.20
Computational time (sec) 1.98

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 The fuel cost function of each generator is expressed as a quadratic equation.
The parameters associated with the load characteristics are considered from the same
reference where in the aggregated load Q0 is equal to 450 MW and the price elasticity
K equals to 20.

Table 7.2 Comparison of MCP and Generated power of Proposed

with Conventional method

FA Conventional
GENCOs (Proposed) Method [122]
MCP P(MW) MCP P(MW)
1 158.6641 156.01
2 50.0000 61.78
3 4.2000 34.2130 4.0386 37.95
4 71.3485 64.84
5 25.8886 24.47
6 25.8886 24.47

The simulation results of power suppliers are presented in Table 7.1. It

includes bidding strategy, bidding power, MCP and profit of power suppliers. The
comparative studies with conventional method [122] are displayed in Table 7.2 to
analyze the MCP and bidding power of power suppliers. It can be seen that the
proposed method provide maximized profits which is better than the conventional
method. Besides, it converges much faster and more reliable than the other available
methods.

Test case: 2 (IEEE 30-bus system)

The IEEE 30 bus system consists of Six Power suppliers who supply electricity
to an aggregate load. The generator data taken from reference [121] is shown in
appendix A.10 (Table A.10.1). The fuel cost function of each generator is available as
quadratic equation. The parameters associated with the load characteristics are
considered from the same reference where in the aggregated load Q0 is equal to 500
MW and price elasticity K equals to 0.

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 Table 7.3 Simulation Results of Six Power suppliers for IEEE 30 bus system

Bidding Bidding Revenue Fuel Cost Profit

GENCOs
Strategy ($/MW) Power (MW) ($) ($) ($)
1 0.03531 160.00 1224.00 416.00 808.00
2 0.07334 80.44 615.37 254.00 361.36
3 0.11883 48.39 370.18 194.74 175.44
4 0.04435 99.21 758.96 404.51 354.44
5 0.06700 55.97 428.17 246.23 181.94
6 0.06700 55.97 428.17 246.23 181.94
Total Profit ($) 2063.12
Market clearing price ($/MWh) 7.65

The simulation results of Six power suppliers for IEEE 30 bus system is
presented in Table 7.3. It includes bidding strategy, bidding power, MCP, revenue,
fuel cost and profit of the six power suppliers. The total profit of six power supplier is
equals to 2063.12 $ and computational time 1.98 sec. It is due to fact that the Firefly
algorithm plays a vital role in search of the global optimal solution.

Table 7.4 Comparison of Bidding Strategies of Six Power suppliers

for IEEE 30 bus system

FA Traditional GSS
PSO [117] GA [114]
GENCOs (Proposed) method [104]
bi bi bi bi
1 0.03531 0.001092 0.001045 0.15800
2 0.07334 0.050953 0.048786 0.04745
3 0.11883 0.181976 0.174254 0.13099
4 0.04435 0.024283 0.023250 0.02458
5 0.06700 0.072791 0.069694 0.05614
6 0.06700 0.072791 0.069694 0.05614

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 Table 7.5 Comparison of Bidding Power and Profit of Six Power suppliers
for IEEE 30 bus system
FA Traditional GSS
PSO [117] GA [114]
GENCOs (Proposed) method [104]
P(MW) Profit($) P(MW) Profit($) P(MW) Profit($) P(MW) Profit($)
1 160.00 808.00 160.00 772.41 160.00 741.45 160.00 557.00
2 80.44 361.36 100.83 340.10 101.20 321.32 91.30 249.00
3 48.39 175.44 32.35 125.06 32.68 119.33 38.80 103.00
4 99.21 354.44 100.00 280.36 100.00 261.01 100.00 200.00
5 55.97 181.94 53.40 136.32 53.00 125.56 54.90 94.00
6 55.97 181.94 53.40 136.32 53.00 125.56 54.90 94.00

Table 7.6 Comparison of MCP, Total profit and Computational time of Six
Power suppliers for IEEE 30 bus system

FA PSO GA Traditional GSS

(Proposed) [117] [114] method [104]
MCP ($/hr) 7.65 6.88 6.69 6.08
Total
2063.12 1790.57 1694.23 1297.00
Profits ($)
Computational
1.98 2.06 6.24 --
time (sec)

Table 7.7 Performance Comparison of Proposed method with Existing

methods for IEEE 30 bus system
Total profit ($)
Methods Best Average Worst
FA
2063.12 2047.52 2021.67
(Proposed)
PSO [117] 1752.60 1689.97 1627.34
GA [114] 1283.89 1187.97 1092.06

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 The comparative studies with Particle Swarm Optimization [117], Genetic
Algorithm [114] and Traditional GSS method [104] are made to analyze the bidding
coefficients of power suppliers and displayed in Table 7.4. The Table 7.5 elaborates
the Bidding power and Profit of different methods. The comparison of market
clearing price (MCP), total profits and computational time of power suppliers for
different methods are presented in Table 7.6. The performance of total profits of
power suppliers are compared with proposed and existing methods in Table 7.7. It is
evident from Table 7.6 the total profit of the proposed method is improved with less
computational time than the other available methods.

7.5 Summary
The Firefly algorithm has been applied to solve bidding strategy in order to
improve the profit of GENCOs (Power suppliers) in an open electricity market. The
numerical examples with Six generators (power suppliers) Test system and IEEE 30
bus system have been considered to illustrate the essential features of the proposed
method. The Firefly algorithm has been used to determine the optimal bidding
strategy in different market rule, different fixed load, different capacity of buyers and
sellers. The results have been projected to bring out the promising nature of technique
for solving complicated power system optimization problem under deregulated
environment.

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