American Institute of Mathematical Sciences

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October  2005, 1(4): 443-463. doi: 10.3934/jimo.2005.1.443

An analysis of staged purchases in deregulated time-sequential electricity markets

Suresh P. Sethi 1, , Houmin Yan 2, , J. Houzhong Yan 3, and  Hanqin Zhang 4,

1. 

School of Management, University of Texas at Dallas, Richardson, TX 75083, United States
2. 

Dept. of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, N.T. Hong Kong, China
3. 

Division of Market Monitoring $\&$ Analysis, Southern California Edison, Rosemead, CA 91770, United States
4. 

Institute of Applied Mathematics, Academy of Mathematics and Systems Science, Academia Sinica, Beijing, 100080, China

Received  May 2005 Revised  August 2005 Published  October 2005

We study the problem of optimal staged purchases of electricity in time-sequential deregulated electricity markets. In recent years, the electricity industry has been deregulated and multiple time-sequential auction markets, such as the block forward, the day-ahead and the hour-of, and the real-time electricity markets, are formed. Thus, a load serving entity need to purchase electricity in these markets economically to meet its demand in each settlement time interval. We use the stochastic dynamic programming approach to establish a condition for staged purchases of electricity to be optimal and study its properties. Two algorithms for computing the optimal staged purchases are also developed.
Keywords: Dynamic programming equation; optimal policy; monotonicity; martingale; algorithm..
Mathematics Subject Classification: 60K30; 90A12; 90A80; 91B3.
Citation: Suresh P. Sethi, Houmin Yan, J. Houzhong Yan, Hanqin Zhang. An analysis of staged purchases in deregulated time-sequential electricity markets. Journal of Industrial & Management Optimization, 2005, 1 (4) : 443-463. doi: 10.3934/jimo.2005.1.443
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