Probabilistic Multi-Product Trading of Hydro Power Plants in Sequential Intraday and Frequency-Regulation Markets

This article has been accepted for publication in IEEE Transactions on Energy Markets, Policy, and Regulation.
This is the author's version which has not been fully edited and
content may change prior to final publication. Citation information: DOI 10.1109/TEMPR.2024.3388959
Probabilistic Multi-product Trading of Hydro Power

Plants in Sequential Intraday and
Frequency-Regulation Markets
Saeed Nordin , Student Member, IEEE, Abolfazl Khodadadi , Student Member, IEEE,
Priyanka Shinde , Student Member, IEEE, Evelin Blom , Student Member, IEEE,
Mohammad Reza Hesamzadeh , Senior Member, IEEE, and Lennart Söder , Senior Member, IEEE
ntw /λntw ID market prices ( e/MWh);

λID ID
Abstract—With the increasing integration of power plants into
the frequency-regulation markets, the importance of optimal M n /M n Maximum/minimum reservoir (m3 );
trading has grown substantially. This paper conducts an in- µkn Production equivalent (MWh/m3 );
depth analysis of their optimal trading behavior in sequential
day-ahead, intraday, and frequency-regulation markets. We in- n No U-Turn sampler (NUTS)-based algorithm: desired
troduce a probabilistic multi-product optimization model, derived mean;
through a series of transformation techniques. Additionally, we L NUTS-based algorithm: target distribution function;
present two reformulations that re-frame the problem as a mixed- NS NUTS-based algorithm: number of iterations;
integer linear programming problem with uncertain parameters. NS a NUTS-based algorithm: number of iterations to adapt;
Various aspects of the model are thoroughly examined to observe
the optimal multi-product trading behavior of hydro power plant N NUTS-based algorithm: normal distribution function;
assets, along with numerous case studies. Leveraging historical u NUTS-based algorithm: uniform distribution function;
data from Nordic electricity markets, we construct realistic S NUTS-based algorithm: step function;
scenarios for the uncertain parameters. Furthermore, we then πw Probability of scenario w;
proposed an algorithm based on the No-U-Turn sampler to Qkn /Qkn Maximum/minimum discharge (m3 );
provide probability distribution functions of cleared prices in
frequency-regulation and day-ahead markets. These distribution S n /S n Maximum/minimum spillage (m3 );
functions offer valuable statistical insights into temporal price τj Water flow time to downstream station (h);
risks for informed multi-product optimal-trading decisions. Vntw Local inflow (m3 );
Index Terms—Bilevel programming day-ahead electricity mar- Variables (lower-case letters)
ket, frequency containment reserve market, hydro power plant, bDA
nst Price bid of hydro unit in DA market ( e/MWh);
intraday electricity market. bFC
nst Price bid of hydro unit in FCR-N market ( e/MW);
qkntw Discharge volume (m3 );
N OMENCLATURE pbDA
nst Quantity offer of hydro unit in DA market (MW);
pbFC Quantity offer of hydro unit in FCR-N market (MW);
Parameters (upper-case letters) nst
DA
gntw Dispatched power by Non-Strategic (NST) unit in DA
ALln Adjacency matrix value;
market (MWh);
AUnj /ADnj Adjacency matrix for hydrologically connected
pDA Dispatched power by Strategic (ST) unit in DA market
nodes(j) upstream/downstream of node n; nstw
DA (MWh);
B nst Maximum bid price in DA market ( e/MWh); FC
gntw Dispatched power by NST unit in FCR-N (MW);
B DA Minimum bid price in DA market ( e/MWh);
nst
FC pFC
nstw Dispatched power by ST unit in FCR-N (MW);
B nst Maximum bid price in FCR-N market ( e/MW); pG Generated power by strategic hydro unit n;
ntw
B FC Minimum bid price in FCR-N market ( e/MW);
ntw ntw Dispatched power in ID market (MWh);
pID+ /p
nst ID-
cDA
n Thermal cost in DA market ( e/MWh); pLltw Power of line l (MW);
cFC
ntw Thermal cost in FCR-N market ( e/MW); mntw Reservoir content (m3 );
DA
Dntw Demand in the DA market (MWh); η NUTS-based algorithm: momentum;
δn Maximum value of droop setting (MW/Hz); x NUTS-based algorithm: position;
∆ft Frequency deviation (Hz); τ NUTS-based algorithm: step size;
DtwFC
Demand in FCR-N market (MW); DA
qntw Hydro reservoir content for DA market (m3 );
ID
Dntw Demand in ID market (MW); sntw Spillage (m3 );
µF
j Expected future production equivalent
FC
Pn Minimum participation level in FCR-N market (MW);
ID+ I. I NTRODUCTION
Pn Maximum participation level in intraday (MWh);
P n /P n Maximum/minimum generation capacity (MW); A. Background and Motivation
Cl Maximum net transfer capacity l (MW); As Europe progresses towards establishing a low-carbon power
λF
w The future electricity price ( e/MWh); system, several notable structural changes are taking place.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License. For more information, see https://creativecommons.org/licenses/by-nc-nd/4.0/
This article has been accepted for publication in IEEE Transactions on Energy Markets, Policy, and Regulation. This is the author's version which has not been fully edited and
These changes encompass an upsurge in the utilization of more entities where one or more of the players involved can
wind power, the gradual decommissioning of thermal power be strategic. The players modeled in bilevel problems can be
plants, the implementation of new inter-connectors to enhance either strategic or non-strategic depending on whether they are
exchange capacities, and the establishment of new electricity on the upper- or lower-level of the model. Several expansion
markets. Concurrently, there is a growing imperative for fast- planning models in the long-term electricity market literature
responding reserves to ensure the security and stability of the follow a bilevel structure to model the interplay between the
power system [1]. system operator and generation or consumption companies.
In this evolving landscape, hydro power producers possess Most of the bilevel models proposed in the literature have
a distinct advantage over traditional generators due to their been focused on the day-ahead (DA) electricity market. In
inherent storage capacity and rapid adaptability in production. [9], the energy storage arbitrage revenue is maximized at the
The ability to store water allows them to optimize revenue upper-level optimization problem whereas the market-clearing
generation across multiple markets, presenting a significant process is modeled at the lower-level optimization problem
challenge and opportunity for these producers [2]–[4]. Fur- which considers both energy storage and wind power. A bilevel
thermore, the increasing reliance on renewable energy sources, model with revenue and network constraints in the DA market
such as wind and solar power, has heightened the demand which also includes the effect of inter-temporal constraints
for short-term balancing services. Hydro power, particularly associated with generation scheduling, demand-side bidding,
when located near intermittent resources, offers a sustainable and marginal pricing is presented in [10]. Some of the research
and viable alternative for providing these essential services. works utilizing the bilevel programming structure consider
As a result, hydro producers may transition from primarily DA and balancing markets. In [11], the participation of an
supplying energy in the day-ahead (DA) market to offering electricity retailer in the DA and real-time markets is modeled
adjustments and balancing services in intraday (ID) and bal- as a two-stage process at the upper level, while the distributed
ancing markets, thus emerging as key players in multiple renewable energy producers are modeled at the lower level.
markets. To achieve success in this evolving paradigm, they Several bilevel models are also developed to consider the
must consider their bidding strategy across all markets as a demand-side perspectives in electricity markets [12]–[14].
unified problem, recognizing that commitments made in one The hydro power planning problems in the literature have
market can influence the flexibility and options available in been majorly modeled as multistage stochastic programming
others [5], [6]. Given their predominant role in the balancing problems and solved using several decomposition techniques
markets, e.g. in Sweden and Norway, hydro power producers [15]–[18]. However, most of these models assume the hydro
tend to assume the role of a price-making asset, significantly power producers to be price takers in the market. As pointed
impacting market-clearing prices. This behavior is commonly out in [19], the topic of strategic hydro power production has
formulated as a bilevel problem in the relevant literature [1], been studied to a limited extent in the literature owing to
[7]. the complexity introduced in the model. Out of the limited
frequency containment reserve normal (FCR-N): Frequency literature on price-making hydro power producers, most of
containment reserve (FCR) markets aim to provide a stable them resort to simplifying assumptions while omitting certain
frequency as it is needed to maintain the balance in the power aspects. For example, hydrological balance and topological
system. Although they are activated automatically, they are details of the hydro power have been omitted in [20] and [21].
traded in the electricity market to have enough reserve. Be- A deterministic study on market power in the hydrothermal
tween the available FCRs, in this paper, frequency containment systems is carried out in [22] by considering the residual
reserve normal (FCR-N) is studied. It is used as reserve in demand curve (RDC) without taking the transmission con-
the normal operation of the power system which is suitable straints into account. Some other works on single hydro power
for our study. In countries in which the FCR-N market is not producers include [23] with RDC and [24] which neglects
available, similar balancing services are available and could be transmission constraints.
modeled similar to FCR-N using the same procedure proposed A strategic hydro power offering model based on the residual
in this paper. It is also important to highlight that the FCR- demand curve scenarios is proposed in [25] where the effect
N market, which attracts over 95% of its bids from hydro of crossing the forbidden zone is integrated into the model.
units, presents a significant strategic opportunity for these In this paper, we consider multiple strategic and non-strategic
units within the balancing market framework. This aspect hydro power producers and thermal generators participating in
underscores the market attractiveness and potential strategic the day-ahead, intraday, and FCR-N markets.
plays, delineating our focus on areas with substantial strategic
implications for the operators, also not including other market C. Contributions of this paper
setups in the current study (like aFRR and mFRR [8]). The The main motivation for this paper is to conduct a compre-
aFRR and mFRR can be included in the future studies for the hensive and detailed study on the increasingly significant role
sake of model completeness. of hydro power assets in hydro-dominated electricity market
setups, particularly focusing on their capacity to act as price-
makers. This research aims to delve into the strategic operation
B. Literature Review and decision-making processes of hydro power plants within
Bilevel modeling has been popularly leveraged in the electric- multi-market environments, where their actions have a pro-
ity market literature to model the interaction between two or found impact on market prices and overall market dynamics.
Table I II. P ROPOSED B ILEVEL F ORMULATION FOR

L ITERATURE REVIEW ON VARIOUS BILEVEL MODELS IN THE ELECTRICITY H YDRO -D OMINATED P OWER S YSTEM
MARKET LITERATURE ON HYDRO POWER PRODUCERS
A. Illustrative Model
PAPERS i ii iii iv v vi vii viii
[1] X X 7 7 X X 7 X A simplified example is presented as shown in Fig. 1 to
[20], [22], [26] X X X 7 X 7 7 7 demonstrate the proposed model used later in Section II. In
[23] 7 7 X X X 7 7 7
[24] 7 7 X X 7 7 7 7 this model, we have four units:
[25], [27] 7 7 X 7 X 7 7 7 Strategic (ST) Units: We have one strategic unit in bidding
This paper X X X X X X X X
zone 1. This unit has the market power and wants to maximize
i) Model multiple hydro power units, ii) Model thermal producer, its profit out of the DA, ID, and FCR-N markets (1a ) by
iii) Strategic hydro power units, iv) Cascaded hydro power unit,
proposing different price bids (bDA
1 for DA and b1 for FCR-
FC
v) Day-ahead electricity market, vi) Intraday electricity market, vii)
Balancing electricity market, viii) Model transmission constraints. N) and volume bids (p1 for DA and p1 for FCR-N).
bDA bFC
Non-Strategic (NST) Units: We have two non-strategic units

(Unit 2 and Unit 3) in bidding zones 2 and 3, respectively.
The study explores how these assets, through their unique char- These two units do not bid to the DA and FCR-N markets;
acteristics and capabilities, can influence and optimize market thus, they follow market cleared prices. The main difference
operations. By doing so, the paper seeks to provide valuable between these two units is that cost of production for Unit
insights and frameworks for operators and policymakers in 2 is relatively negligible (representing e.g. renewable energy
managing and leveraging the potential of hydro power in an units such as wind and solar) but Unit 3 has variable costs
evolving energy landscape. The current paper contributes to of cDA
4 and c4 for DA and FCR-N markets, respectively. We
FC
the related body of literature as follows:

C1: A novel stochastic bilevel optimization approach is pro- D1DA pDA FC
1 , p1 D2DA g3DA, g2FC D3DA g4DA, g3FC
Illustrative
example
posed for the strategic operation of hydro power plants in
1:ST Line 1 : pL 2:NST Line 2 : pL 3:TH
sequentially cleared electricity markets, including day-ahead, DA FC
1 2
D FC
λ1 ,λ λD A
λD A
FCR-N, and intraday trading. The novelty lies in employing 2 3
a bivariate bid curve analysis, allowing for variable offer

prices and volumes, enhancing strategic decision-making. This Figure 1. Schematic of illustrative exmaple. ST: strategic unit, NST: non-
strategic units, TH: non-strategic thermal unit, w/: with, w/o: without, NA:
methodology, applicable to various power plant types, empha- not applicable. DFC is not defined for all busses or units.
sizes the advantage of enabling market players to dynamically
adjust bid prices and volumes, as detailed in Section II.A. have proposed the following bilevel formulation to model the
Such flexibility leads to more realistic bid submissions and strategic behavior of strategic units in DA and FCR-N markets.
maximizes revenue by optimizing capacity allocation across
different market setups.
C2: Two Reformulations are proposed to convert our original Maximize (pDA DA FC FC
1 λ1 + p1 λ ); (1a)
XUP,YDA,YFC
nonconvex and nonlinear problem into a mixed integer linear DA DA FC FC DA FC
programming (MILP) problem which can be efficiently solved Subject to: pG DA
1 = p1 ; B 1 ≤b1 ≤B 1 ; B 1 ≤b1 ≤B 1 ; (1b)
using off-the-shelf solvers. This is handled by McCormick pFC bDA bFC bDA bFC
1 ≥ 2P 1 ∆f/δ1 ; p1 +p1 ≤P 1 ; p1 -p1 ≥0; (1c)
envelop reformulations and replacing the bilinear terms with DA
:= argmin (b̂DA DA DA DA
(1d)
Y 1 p1 + c4 g4 );
linear equivalents. XDA
C3: The available historical data from electricity markets are Subject to: p1 -p1=D1DA: λDA
DA L DA L L
1 ; g3 +p1 -p2=D3 :λ3 ;
DA DA
(1e)
used to generate scenarios for scenario dependent parameters g4DA+pL2 = D4DA: λDA L 5 5
4 ; -C 1≤ p1≤C 1: ν 1 , ν 1 ; (1f)
in different years. Then, we used No-U-Turn sampler based -C 2≤ p2≤C 2: ν 2 , ν 2 ; 0 ≤ p1 ≤ p̂1 : ν 61 , ν 61 ;
L 5 5 DA bDA
(1g)
algorithm to calculate probability distribution function (PDF)
of the cleared FCR-N and DA market prices. The PDF of 0 ≤ g3DA ≤ P 3 : ν 73 , ν 73 ; 0 ≤ g4DA ≤ P 4 : ν 74 , ν 74 ; (1h)
prices are crucial for those who want to plan their operational YFC := argmin (b̂FC FC FC FC
1 p1 + c3 g2 + c4 g3 );
FC FC
(1i)
XFC
and investment decisions in ID and FCR-N markets by looking
at the optimal price distributions. Subject to: pFC FC FC
1 +g2 +g3 = D
FC
: λFC; pFC
1 ≤ p̂1
bFC
: θ11 ; (1j)
C4: A series of case studies are used for concept-proving and g2FC≥ 2P 3 ∆f/δ3 : θ36 ; g3FC≥ 2P 4 ∆f/δ4 : θ46 ; (1k)
testing the functionality of our proposed methodology in the g2FC + ĝ3DA ≤ P 3 : θ37 ; g3FC + ĝ4DA ≤ P 4 : θ47 ; (1l)
sequential market analysis. They study different aspects of the
pFC DA 9 FC DA 10 FC DA
1 ≤ p̂1 : θ1 ; g2 ≤ ĝ3 : θ3 ; g3 ≤ ĝ4 : θ4 ;
10
(1m)
complexities in the operation of hydro power plants in the
multi-market setups. Where, in the upper level, (1b ) limits the bid prices for the
Numerical results of the proposed model for the illustrative strategic unit, (1c ) represents the minimum generation for
example in Section II are presented in Section III-A and III-B. each unit in FCR-N market and (1c ) shows the limits of bid
Our proposed methodology is explained comprehensively us- volumes based on the units’ generation limits. In the lower
ing this illustrative example. The proposed model is explained level, we have two cascaded market clearing formulations.
in detail for a general problem in the rest of the current section. First, DA market is cleared through the minimization of the
costs for the market operator in each unit which is the multi- In the presented analysis, the distinction between auction-
plication of dispatched powers (pDA 1 , p2 , and g4 ) and their
DA DA
based markets, such as the day-ahead and FCR-N markets, and
respective bid prices modeled as a fixed parameter (shown the continuous nature of the intraday market is highlighted due
with hat) in the lower level. (1e )-(1f ) represent the energy to its significance in strategic operations. The intraday market,
balance equations based on Fig. 1. (1g ) demonstrate the line in particular, serves as an essential adjustment platform for
power transfer limits and (1g )-(1h ) show the limits of the units that have encountered forecasting inaccuracies, whether
dispatched power based on the bid volumes in the upper level. in generation or demand. This market is identified as a more
After DA clearing, the FCR-N market is cleared by minimizing suitable venue for strategic actions, given that approximately
the TSO’s costs1 for procuring the required FCR-N volume 95% of bids in the FCR-N market originate from these hydro
(1i ). The power balance is stated in (1e ). Dispatched limits units. Furthermore, the FCR-N market is characterized by spe-
based on the bids in the upper level are provided in (1j ) and cific price trends and peaks, offering profitable opportunities
(1k ). Minimum FCR-N volumes for the Unit 3 and Unit 4 for strategic bidding. The structure of the proposed model is
are shown and the maximum dispatched volumes based on the shown in Fig. 2. The diagram presents the structure of the
maximum generation capacity and the volume dispatched in optimization model, highlighting the roles and interactions of
the DA market are demonstrated in (1k ) and (1l ). different power plants with the market. The first box depicts
In the rest of this section, we have extended the formulation a strategic hydro power plant capable of both influencing
of the illustrative example to propose a bilevel problem to find and responding to the DA and FCR-N markets, though it
an optimal solution for the concurrent operation of strategic only gathers data from the ID market. The next two boxes,
hydro power producers in the DA, FCR-N, and ID electricity representing a price-taker hydro and a thermal power plant,
markets. These strategic units are price-makers in the DA and illustrate their one-way interaction with the markets due to
FCR-N markets but they are price-takers in the ID market. their lack of market influence; they solely collect market
In this study, we have focused on strategic behaviors in the data without affecting prices. Below these representations, a
DA and FCR-N Markets for three main reasons: (1) The timeline outlines the scheduling of the markets. ”D” indicates
market mechanism in the day-ahead and all frequency markets the operation day and ”D-1” refers to the day before operation.
including FCR-N are based on the pay-as-cleared auctions. Both the DA and FCR-N markets have gate-closure in the
The DA and FCR-N markets use the same mechanism for day-ahead, while the intraday market operates post-DA gate-
calculating the market prices. However, the intraday market closure time until approximately an hour before the operation
is a continuous auction and it uses pay-as-bid mechanism starts.
for calculating the ID market price. In this study we were
focusing on strategic behaviors only in the DA and FCR-N Grid
markets partly due to their similar pricing mechanisms. (2)
Also, the main objective of the intraday market is for the
units that have had the wrong forecast of their generations
ST NST TH
(or consumption on the demand side) to adjust their positions.
Although it is logically possible to exercise the market power
in the intraday market, it is not permitted due to ACER
Dam
Guidance on REMIT application1. (3) The day-ahead market
is one of the main market platforms for hydro power producers Dam
to participate in, and they have a large share of generation mix
in the hydro dominated markets such as the Swedish electricity
market (hydro power producers are dominant players in the
DA DA DA
DA market). Also, around 95% of the bids in the FCR-N
market comes from hydro power units [28]. Accordingly, the ID ID ID
DA and FCR-N markets are appropriate playing ground for
hydro power producers to act strategically. Besides, the price FCR-N FCR-N FCR-N
pattern in the FCR-N market has special trends and peaks that
make it even more profitable for these units. For the above
three reason here we have focused on the strategic behaviors
FCR-N
in the DA and FCR-N markets. However, this does not mean DA ID
that the ID market is not prone to exercise of market power. t
D-1 D
We have just put it aside for the current paper. Extending our
Water flow Elec. Net. Market Info.
model such that it can include the strategic behaviors in the
ID market is a good extension of our work as mentioned later
Figure 2. Structure of the proposed model. DA: Day-ahead; FCR-N: Fre-
in Section IV. quency containment normal reserve; ID: Intraday; ST: Strategic unit; NST:
Non-strategic unit; TH: Non-strategic thermal unit.
1 In the Nordic electricity market, the DA market is cleared by the Nomi-
nated Electricity Market Operators (NEMOs) where Nord Pool is active in the
Nordic electricity market. Balancing markets are cleared through respective For the sake of clarity, the interaction of units and different
TSO in each bidding zone. markets with their respective constraints are depicted in Fig.
ID+
3 and elaborated in the following subsections. limit, P n , in the ID market is determined from the dispatched
powers in the DA market gntw DA
nstw .
and pDA
Maximize w πw ( pnstw λDA
DA
P P
Day-ahead Bidding: Intraday: FCR-N Bidding: +
XUP,YDw
A,YFC
w ST
n∈N ,s,t | {z ntw}
Maximize the Maximize the Maximize the (1)
Enstw
strategic producer’s strategic producer’s strategic producer’s
pFC FC
(λID ID+
− λID ID-
P P
expected profit in expected profit in expected profit in nstw λtw + ntw pntw ntw pntw )+
n∈NST,s,t | {z } ST
n∈N ,t
DA market ID market FCR-N market (2)
Enstw
FP D F
(2a)
P
λw n∈NSTmnT w j∈N Anj µj );
FCR-N price
Dis. power
FCR-N bid
Dis. power
DA price
DA bid
The above objective function is subjected to the following

constraints. The balance between production and discharge is
Day-ahead clearing:
enforced by (3).The expression ”∀t, w” is dropped from now
FCR-N clearing: Minimize
Minimize cost plus value cost + value of stored water
on for the sake of brevity.
of stored water Subject to:
DA Dis.
(3)
P DA ID+ ID- ST
Subject to:
P
-Load balance power
-Load balance k µkn qkntw = s pnstw + pntw − pntw , ∀n ∈ N ;
-Participation limit
-Hydrological balance
-Operational limits
-Transmission limits Reservoir content at station n, spillage from station n, and
-Energy limits
-Transmission limits discharge volume of station n are limited by their minimum
or maximum values in (4).
M n ≤ mntw ≤ M n ; S n ≤ sntw ≤ S n ; ∀n ∈ NST
Figure 3. Schematic of the proposed bilevel programming problem. DA: Day- (4)
ahead; ID: Intraday; FCR-N: Frequency containment normal reserve; Dis.: Qkn ≤ qkntw ≤ Qkn , ∀n ∈ NST;
Dispatched.
Price offer of hydro unit n in DA and FCR-N markets are
limited by their minimum/maximum bid price in (5).
DA FC
B DA DA FC FC ST
nst ≤ bnst ≤ B nst ; B nst ≤ bnst ≤ B nst , ∀n ∈ N ;
(5)
B. Upper-level problem The requirements on the FCR-N offers are specified in (6).
(6)
P FC ST
The upper-level problem formulation is written in (2a ) to s pnstw ≥ (2P n ∆ft )/δn , ∀n ∈ N ;
(9c ) for set of variables XUP = {gntw DA
nstw , pnst , pnst ,
,pDA bDA bFC
To make sure that the bidding curve is descending the con-
gntw , pnstw ,pntw , pntw , pltw , qntw , bnst , bnst , qkntw } in which
FC FC ID+ ID- L DA DA FC
straints (7) are used.
n ∈ N = {1, 2, . . . , NH} as the node index, t ∈ T = {1, 2,
. . . , NT} as the time index, w ∈ W = {1, 2, . . . , NW} bDA DA FC FC ST
n,s-1,t ≤ bnst ; bn,s-1,t ≤ bnst , ∀n ∈ N ; (7)
as the scenario index, k ∈ K = {1, 2, . . . , NH} as the
hydro generation segment index, l ∈ L = {1, 2, . . . , NL} Total power generation at node n is limited by maximum/min-
as the line index, s ∈ S = {1, 2, . . . , NB} as the price imum generation capacity in (8a ) and (8b ).
and volume segments. YDA w and Yw are defined as the set of
FC P bDA bFC ID+ ID- ST
(8a)
s (pnst + pnst ) + pntw − pntw ≤ P n , ∀n ∈ N ;
optimal solutions for the lower-level DA and FCR-N markets, P bDA bFC ID+ ID- ST
s (pnst − pnst ) + pntw − pntw ≥ 0, ∀n ∈ N ; (8b)
respectively. The objective function of this problem in (2a )
is to maximize the total revenue of strategic hydro units in Buy and sell volumes in the ID market are limited in (9a ),
the DA, FCR-N, and ID markets plus the total value of stored respectively.
water. The objective function is multiplied by its probability ID+ ID+
πw and summed over scenarios as the proposed problem is pID+ ID- ST
ntw ≤ P n ; pntw ≤ P n , ∀n ∈ N ; (9a)
a stochastic problem. In this formulation, NST ∈ {1, 2, . . . , pDA DA L
nstw , gntw , pltw , qkntw , sntw , mntw ∈ YDA
w ; (9b)
NN(ST) } is the set of strategic units, N-ST ∈ {1, 2, . . . , NN(-ST) } pFC FC FC
(9c)
nstw , gntw ∈ Yw ;
is the set of non-strategic hydro units, N TH ∈ {1, 2, . . . ,
NN(TH) } is the set of non-strategic thermal units.
C. DA market clearing
In the Nordic electricity market, once the DA market is
cleared, the DA market clearing price and dispatched power DA market clearing is formulated in (10) to (17). In (10), the
are available for ID market participants. Looking at the histor- objective function is to minimize the cost of procuring the
ical data, we see a strong correlation between the DA market required demand by TSO in the DA market. XDA = {pDA nstw ,
and ID market prices (mostly linear relation). Therefore, this
DA
gntw , pLltw , qkntw , sntw , mntw |pDA DA
nstw ≥ 0, gntw ≥ 0, qkntw ≥
relation between ID market prices (λID ntw and λntw ) and the
ID 0, sntw ≥ 0, mntw ≥ 0} is the set of DA market decision
DA market price λntw is determined with statistical analysis.
DA variables.
The statistical properties of the DA and ID prices and their YDA DA DA
w := argmin
P
s,t,n∈NST b̂nst pnstw +
linear relation are provided in the numerical results of this XDA
paper. Power volumes in the ID market are relatively smaller

P DA DA FP P D F (10)
t,n∈N THcn gntw − λw n∈N-STmnT w j Anj µj ;
than DA market volumes (about 1-7%). Therefore, the volume Subject to: (11), (12), (13), (14), (15), (16), and (17);
In objective function (10), the value of the stored water in the E. FCR-N market clearing
downstream non-strategic units is reflected through the last FCR-N market clearing is formulated in (19) to (22). In (19),
term instead of introducing a constraint to limit the reservoir objective function is to minimize the total cost of procuring
level to a specific level at the end of the time horizon, the later the required FCR-N resources over all the units.
modeling approach is proposed in [29]. The power balance There is an important consideration about the terms in the
in DA market for all stations (strategic and non-strategic) is objective function. The value of stored water as the opportunity
written in (11). cost for the non-strategic hydro power plant (HPP) has not
been included in the (19) while we have it in (10). The main
(11)
P DA DA P L L DA DA
s pnstw + gntw + l Aln pltw = Dntw : λntw ; reason is that FCR-N market is a capacity market and it does
Hydrological balance constraint is formulated in (12). not include energy activation 2 or remuneration while in the
DA market, the market operator clears the market for the
energy activation during the day of operation. Thus, we need to
P
mntw = mn,t-1,w + Vntw − k qkntw −
sntw + j AUnj ( k qkj,t-τj ,w + only consider the related operational constraints and variables
(12)
P P
in the DA market.
1
sj,t-τj ,w ) : ηntw , ∀n ∈ NST ∪ N-ST; However, we need to take into account the opportunity cost
of non-strategic HPP; otherwise, it would be evident that TSO
Discharge volume, reservoir content, and spillage from station
activates all of its available capacity first without considering
n are limited in (13).
its opportunity cost. Based on the definition of opportunity
Qkn ≤ qkntw ≤ Qkn : ν 2kntw , ν 2kntw , ∀n ∈ NST ∪ N-ST; (13a) cost, which is the expected foregone profit of the DA market
which is allocated to the capacity market instead of the energy
M n ≤ mntw ≤ M n : ν 3ntw , ν 3ntw , ∀n ∈ NST ∪ N-ST; (13b) market, our proposed approach is to find the expected value of
-ST
S n ≤ sntw ≤ S n : ν 4ntw , ν 4ntw , ∀n ∈N ST
∪N ; (13c) the future electricity price for the day-ahead energy market and
set it as the capacity costs for the non-strategic HPP. It should
Power of lines pLltw are limited in (14). be noted that the non-strategic HPP does not exert market
power and they only watch the market behavior while strategic
− C l ≤ pLltw ≤ C l : ν 5ltw , ν 5ltw ; (14) HPP exercises the market power to maximize their expected
profit. Set of decision variables for FCR-N market is XFC = {
Dispatched power has to be less than the offered quantity as
nstw , gntw |pnstw ≥ 0, gntw ≥ 0}.
pFC FC FC FC
enforced by (15). We have used the hat symbol to show that
the upper-level variable is used as a parameter in the lower- YFC
w := argmin b̂FC FC
P
nst pnstw +
XFC s,t,n∈NST
level problem.
cFC FC (19)
P
ntw gntw ;
0≤ pDA
nstw ≤ p̂bDA
nst : ν 6nstw , ν 6nstw , ∀n ∈N ; ST
(15) t,n∈N-ST∪N TH
Subject to: (20), (21), (22), and (23a );
In order to ensure that the dispatched power by non-strategic
unit is less than the maximum power generation capacity, we Power balance in FCR-N market for all stations (strategic and
impose (16). non-strategic) is written in (20).
FC FC FC FC
n∈NST,s pnstw + (20)
P P
n∈N TH∪N-ST gntw = Dtw : λtw ;
DA
0 ≤ gntw ≤ P n : ν 7ntw , ν 7ntw , ∀n ∈ N-ST ∪ N TH; (16)
Constraint (21) is enforced to make sure that the dispatched
Using the production equivalent and discharge volume, the power for the strategic hydro unit n in FCR-N market is less
dispatched power for the non-strategic unit can be calculated than the offered quantity by the hydro unit n in FCR-N market.
according to (17).
pFC bFC 1 ST
nstw ≤ p̂nst : θnstw , ∀n ∈ N ; (21)
DA 2
, ∀n ∈ N-ST; (17)
P
gntw − k qkntw µkn = 0 : ηntw The FCR-N requirements for the non-strategic players are
included in (22).
In the above formulation, the values of the variables with
hat signs are fixed to the optimal values from the upper-level
FC
gntw 6
≥ (2P n ∆ft )/δn : θntw , ∀n ∈ N-ST ∪ N TH; (22)
problem and are treated as parameters here. According to (23a ), the maximum power generation capacity
of the non-strategic unit is accounted for while dispatching it in
the FCR-N market where the DA dispatch (ĝntw DA
) is considered
D. KKT of DA market clearing
to be a parameter.
The KKT conditions of the DA market clearing are straight-
forward to obtain and they are not derived here. However,
FC
gntw DA
+ ĝntw 7
≤ P n : θntw , ∀n ∈ N-ST ∪ N TH; (23a)
the following will be used later in Reformulation 1 and pFC DA 9 ST
nstw ≤ p̂nstw : θnstw , ∀n ∈ N ; (23b)
Reformulation 2 which are stated here: FC
gntw DA
≤ ĝntw 10
: θntw , ∀n ∈ N-ST ∪ N TH; (23c)
2 We have energy activation for FCR-N market, and reimbursement would
b̂DA DA 6 6 DA ST
nst + λntw + ν nstw − ν nstw = 0 : pnstw , ∀n ∈ N ; (18a)
be based on the real-time market prices, but it is small enough to be neglected
ν 6nstw (p̂bDA DA 6 DA ST
nst -pnstw ) = ν nstw (pnstw ) = 0, ∀n ∈ N ; (18b) for changing the reservoir level of hydro power plants.
F. KKT conditions for FCR-N market clearing Algorithm 1 The proposed NUTS-based algorithm
Similarly, the KKT conditions of the FCR-N market clearing Algorithm
Require: x01, n,The proposed NUTS-based algorithm
NS, NS a , L;
is straightforward to obtained and they are not derived here. Require:
1: η ∼ N (0,
x01); 0←
−1;
, n,τNS,
0
NSηa ,=L;η + Ox L(x)τ0 /2 + Ox L(x )τ0 /2;
0
2:
1: η−1
a← ∼N −(0,
2S(0.5 00 0
1); τ0− ←
−1;
0
η + Oxη));
p(xη , η=)/p(x, 0
L(x)τ x← −x
0 /2+ + O)τ
+τO0x(ηL(x L(x)τ
/2; 0 /2);
However, the followings will be used later in the Reformula-
x0
3:
2: if −1
a← (2p(x 0
, η 0 )/p(x,
− 2S(0.5 − p(xη))0 ,aη> 0 1 then
)/p(x, η)); x0← −x + τ0 (η + Ox L(x)τ0 /2);
tion 1 and 2 which are stated here: 4:
3:
0
if (2p(x
η =η 0 0 Ox L(x)τ
, η+)/p(x, a
η))0 /2 >+1 O then
0
x L(x )τ0/2; τ0 ←
a 0
− 2 τ0 ; x = x + τ0 (η +
4: Ox L(x)τ
η 0 = η0 + /2);Ox L(x)τ0 /2 + Ox L(x0 )τ0/2; τ0 ← − 2a τ0 ; x0 = x + τ0 (η +
5: go to 3;
Ox L(x)τ
bFC FC 1 9 FC
nst + λtw + θnstw + θnstw = 0 : pnstw ; ∀n ∈ N
ST
(24a) 6:
5: elsegoω=
0 /2);
to 0.05;
3; o0 = 10; I 0 = 0; τ 0 = 0; ρ = 0.75; c = 1; ξ = log(10τ0 );
1 7:
6: end ω
else if = 0.05; o0 = 10; I 0 = 0; τ 0 = 0; ρ = 0.75; c = 1; ξ = log(10τ0 );
θnstw (p̂bFC
nst − pFC
nstw ) = 0, n ∈ N ; ST
(24b) 8:
7: if c <
end if NS then c−1 )−η 0 ·η 0 /2
9:
8: if c Sample
< NS ηthen 0
∼ N (0, 1); Resample f ∼ u([0, E L(x ]);
c−1 )−η 0 ·η 0 /2
10:
9: x+ ←
Sample−xc-1 η 0;∼xN←
- c-1
(0, 1);; x
−x c
←−xc-1f; η
Resample
+
−η 0 ; E
←
∼ u([0,
-
ηL(x−η 0 ; e←
← −1; d← −1;]);b← −0;
G. Proposed No-U-Turn sampler based algorithm 11:
10: xif e←
+ = 1 then
−x c-1
;x ←- Choose; direction
−x c-1
x ←c c-1
−x g;b η ∼←+ 0
−η ; η1});
u({-1, -
← 0
−η ; e← −1; d← −1; b← −0;
The proposed NUTS-based algorithm, illustrated in Fig. 1, in- 12:
11: if eif=g1
0
b = then then direction gb ∼ u({-1, 1});
-1Choose
13:
12: if gb(−,x
0
= -1
- 0
,−,η - ,dh ,d0 ,h,e0 )←
,x then −Tree(x- ,xc-1 ,η - ,η 0 ,f ,gb ,τc-1 ,b);
corporates a tree algorithm, depicted in Fig. 2, for constructing 14:
13: else(−,x + - 00 + -
(x ,−,x ,η ,−,d
,x ,−,η
0
,dhh,d,d0 ,h,e
0
,h,e0 )←)←−Tree(x-+,x,xc-1
−Tree(x
c-1 -+ 00
,η,η ,η,η ,f,f,g,gbb,τ,τc-1
c-1 ,b);
,b);
a binary tree utilizing repeated doubling, as detailed in [30]. 15:
14:
0
elseif(xe+ ,−,x
= -1 0 then
,η + ,−,dxh ←
c 0 0 0
−x,h,e
,d with )← probability
−Tree(x ,x mind
+ c-1 0 0
,η +/d,
,η ,f 1;,gb ,τc-1 ,b);
16:
15: else
if 0
e d←=−d
0
-1+ then
d, b← c
x−b← 0
+ 1,with
−x e← 0 0
−eprobability +
S(η · (x mind -
0
− x /d,))S(η 0 +
1; · (x − x ));
+
Each state within the proposed NUTS-based algorithm is 17:

16: end d←
else if −d0 + d, b← −b + 1, e← −e0 S(η 0 · (x+ − x- ))S(η 0 · (x+ − x+ ));
defined by a position vector x and a momentum vector 18:
17: endend if if
19:
18: elseend if
η. The algorithm takes inputs comprising the current state 20:
19: elseif c ≤ NS then√
a
I c← −(1 − 1/(c + o0 ))I c-1 + (n − h/dh )/(c + o0 );
(x, η), initial state (x0 ,η 0 ), resample value (f ), direction 21:
20: if c log(τ
≤ NS a −ξ− cI /ω; log(τ )←
c )← then√ I c← −(1
c − 1/(c + c o −c -ρ
log(τ
0 ))I c-1 +c(n)+(1−c -ρ
− h/dh)log(τ )/(c +c-1 o0 );
22:
21: elselog(τ
τc ←−τ c )←
NS−ξ−a; cI c /ω; log(τ c )← −c-ρ log(τc )+(1−c-ρ)log(τ c-1 );
(g ∈ {-1, 1}), step size (τ ), and tree height (b), which are 23:
22: end τifc←
else −τ NS a ;
provided to the tree algorithm. The selection of direction 24:
23: endendif if
25:
24: elseend
Stopif
g follows a discrete uniform distribution. The step function 26:
25: end Stop
else if
S(x) = 1 if x ≥ 0, 0 if x < 0 is utilized for a given real 26: end if
number x.
This algorithm employs a leapfrog integrator to determine the Algorithm 2 The proposed tree algorithm
next steps by advancing to or retreating from Steps 1, 2, 4, Algorithm
Require: η02, η,The proposed tree algorithm
f , g, b, τ , x0 , x;
. . . .(utilizing repeated doubling) through a recursive algorithm. 1: if b = 0η 0then
Require: f0, g,
, η, x = b,
x+ 0
τ , τx(η x; Ox L(x)τ /2);
,+
2: if b η=0 0=then
0 0 0
1: η + xO0x= x + /2
L(x)τ τ (η++OO 0
L(x)τ
L(x /2);d0←
)τ /2; −S(E log(x )−η ·η /2 );
If the tree height is zero in Steps 1 and 2, a single step is 2: Ox L(x)τ
0
xx
0 0
/2 + O )−η ·η 0/2 0 0 0
/2; d0← −S(E log(x )−η ·η /2 );
3: e0 ←
η = η−+S(f
−1 − E ∆+L(x x L(x )τ);
executed in the designated direction g in Steps 3 to 7. In 3:
4: 0
return
e ←−1 − 0 0 −
(xS(f,x ,x0 ,ηE0∆+L(x
0 )−η 0 ·η 0 /2
,η 0 ,1,d0 ,min{1, E); L(x0 )−η 0 ·η 0 /2−L(x0 )η 0 ·η 0 /2
},e0 )
cases of non-zero height b, the algorithm recursively doubles 5:
4: else (x + - 0 0 +0 -0 00 00 0 0 0
,x ,x
return (x,η,x ,η,x ,d ,d ,1,d
,ηh,η ,h ,e,min{1,
−Tree(x,x
)← 0 0 )−η
E L(x,η,η
00 ·η 0 /2−L(x0 )η 0 ·η 0 /2
,f ,g,τ ,b − 1) },e0 )
6:
5:
0 - 0 + - 0
elseif(xe+ ,x 1 then
= ,x ,η ,η ,dh ,d0 ,h0 ,e0 )← −Tree(x,x0 ,η,η 0 ,f ,g,τ ,b − 1)
with height b − 1. The termination condition for the algorithm 7:
6: if e0if = g= -1 then
1 then
involves resetting the indicator e0 to zero when the rightmost 8:
7: if g(−,x
- 00
= -1,xthen ,−,η - ,d00 00 00 00
h ,d ,h ,e )← −Tree(x- ,x0 ,η - ,η 0 ,f ,g,τ ,b − 1)
9:
8: (x+ ,−,x
else(−,x - 0000 ,η + ,−,d
,x ,−,η - ,d00
00 0000 0000 0000
,d ,h ,e )←
hh,d ,h ,e )←
−Tree(x-+,x,x00,η,η-+,η,η00,f,f,g,τ
,g,τ,b,b−−1)
1)
state and the leftmost state overlap, indicating a U-turn. Thus, 10:
9: end (x
else if + ,−,x00 ,η + ,−,d00 ,d00 ,h00 ,e00 )←
−Tree(x
−Tree(x+ ,x0 ,η + ,η 0 ,f ,g,τ ,b − 1)
if e0 = 0 in Step 8, the tree algorithm returns the computed
h
11:
10: x0 ←
end
00 00
if with probability d /(d + d ); d ←
−x 0 00 0
−d0 + d00 ;
12:
11: e00← 00
−x00S((x
−e +
−x- )·η + )S((x
with probability
+0
d00 /(d−x
- 00 - 0 0 0 0 00 00
+ d)·η ); );
dh ←−h++h d ; ; dh←
0
−d0h +d00 h;
values in Step 12. 13:
12:
x
elseereturn
0 (x+ ,x+-−x
−e00 S((x
+ +- 0
,x0-,η)·η ,dh ,d0+,h
,η )S((x 0 -0
,e )·η
) - ); h0←
←−d
−h0 +h00 ; d0h← −d0h +d00
← −x h;
In Step 8 if e0 = 1, signifying the absence of a U-turn, the 14:
13: end return
else if (x+ ,x- ,x0 ,η + ,η - ,d0h ,d0 ,h0 ,e0 )
15:
14: endendif if
leapfrog integrator is again utilized to execute one additional 15: end if
step in the specified direction g in Steps 9 to 11. At each dou-
bling, the subsequent forward/backward state (x+ /x- , η + /η - )
is determined in Step 9 or 10. The previous state x0 is defined
in Step 11. Lastly, the tree algorithm returns the established P DA DA 1
results in Step 12. t,n∈NST∪N-ST(Dntw λntw + Vntw ηntw +
P 2 2 3 3
k (Qkn ν kntw − Qkn ν kntw ) + M n ν ntw − M n ν ntw +
H. The Linear Programming (LP) Equivalent S n ν 4ntw − S n ν 4ntw ) + t,l (C l ν 5ltw + C l ν 5ltw )+
P
An approach similar to [31] is implemented here to remove P

P n ν 7ntw +
P
cFC FC P FC FC
Dtw λtw −
(1) (2) ntw gntw +
the nonlinear terms from (2a ). Expressions Enstw and Enstw t,n∈N-ST∪N TH t,n∈N-ST∪N TH t
are parts of the stationary conditions. Therefore, they can 6 7
P P
θntw (2P n ∆ft )/δn + (P n θntw −
be replaced by a linear combination of the Lagrangian dual t,n∈N-ST∪N TH t,n∈N-ST∪N TH
variables. After applying stationary conditions, complementary DA 7 10 DA
(λID ID+
P P
gntw θntw ) + θntw gntw + ntw pntw −
slackness conditions, Reformulation 1 and Reformulation 2 as | {z
(3)
} t,n∈N-ST∪N TH | {z } n∈NST,t
(4)
Entw Entw
they follow, the objective function (2a ) can be equivalently
λID ID- F
AD F
(25a)
P P
written as (25a ). The original objective function (2a ) has the ntw pntw )+λw mnT w nj µj );
(1) (2) n∈NST j∈N
bilinear terms Enstw and Enstw , while they are removed from
the linear equivalent (25a ). Using (25a ), the only remaining Reformulation 1: The nonlinear total revenue of strategic
(1)
nonlinear term in the proposed model is gntw DA 7
θntw which will hydro units in DA market (Enstw ) can be equivalently replaced
(3)
be replaced by Entw later. by a linear sum of upper and lower limits multiplied by their
Maximize P P DA DA corresponding Lagrangian dual variables.
XUP,YD A FC
w ,Yw
w πw ( t,n∈N THcn gntw + Proof: First we start with the original bilinear formulation for
(1)
− λF D F DA DA
Enstw = pDA nstw λntw . The aims is to find a linear equivalent
DA
P P P
w n∈N-STmnT w j Anj µj + t,n∈N THDntw λntw +
(1)
for Enstw . First, the strong duality condition for DA market an MILP problem which can be solved with the commercially
clearing is written in (26). available solvers.
(3)
b̂DA DA P DA DA
Entw ≥ 0, n ∈ N-ST ∪ N TH; (28a)
P
− nst pnstw − cn gntw +
s,t,n∈NST t,n∈N TH (3)
F P P D F P DA DA Entw ≥ 7
P n θntw +M 17 gntw
DA
-P n M 17 , n ∈ N-ST∪N TH; (28b)
λw mnT w Anj µj = Dntw λntw +
(3) (3)
n∈N-ST j t,n∈N TH Entw ≤ 7
P n θntw ; Entw ≤ M 17 gntw
DA
, n ∈ N-ST ∪ N TH; (28c)
P DA DA 1
(Dntw λntw + Vntw ηntw + (26)
t,n∈NST∪N-ST
The McCormic envelopes could be used to have a convex
(4)
2 2 3 3 relaxation for Entw = gntw θntw where 0 ≤ gntw
DA 10 DA
≤ P n and
k (Qkn ν kntw -Qkn ν kntw ) + M n ν ntw -M n ν ntw +
P
(4)
0 ≤ θntw ≤ M which are written in (29). By using Entw
10 20
S n ν 4ntw -S n ν 4ntw )+ t,l (C l ν 5ltw +C l ν 5ltw )+
P
instead of gntw θntw in (25a ), the proposed model becomes
DA 10
bDA 6
s,t,n∈NSTp̂nst ν nstw +
7 an MILP problem.
P P
t,n∈N-ST∪N THP n ν ntw ;
(4)
From (18a ), we can write pDA DA DA
nstw b̂nst + pnstw λntw +
DA Entw ≥ 0, n ∈ N-ST ∪ N TH; (29a)
DA 6
pnstw ν nstw = 0; and from (18b ) we have (4)
Entw ≥ 10
P n θntw +M 20 gntw
DA
-P n M 20 , n ∈ N-ST∪N TH; (29b)
(1)
ν 6nstw p̂bDA nstw pnstw . It gives us Enstw
6 DA
nst = ν = (4) (4)
DA
pnstw λntwDA
= −pnstw b̂nst − ν nstw p̂nst . Finally
DA DA 6 bDA Entw ≤ 10
P n θntw ; Entw ≤ M 20 gntw
DA
, n ∈ N-ST ∪ N TH; (29c)
the strong duality condition (26) is rewritten
(1)
as DA DA I. Data and model parameters
P P
ST p λ
nstw ntw = E
n∈NST,s,t nstw =
P n∈N ,s,t DA DA
- s,t,n∈NSTpnstw b̂nst - t,n∈NSTν nstw p̂nst6 bDA Scenario dependent parameters are Vntw , mn0w , Dntw DA
ntw ,
, cFC
P
=
DA DA F Dtw , λntw , and λntw listed in Table II. Market data from Nord
FC ID ID
P P P D F
c g − λ - m A µ +
Pt,n∈N nDAntwDA P
TH w n∈N ST nT w j nj j
t,n∈N THDntw λntw + t,n∈N
DA DA
ST∪N-ST(Dntw λntw +Vntw ηntw +
1 Pool are used to generate the scenario [6], [32]. The hydro
P 2 2 3 3
−Qkn ν kntw )+M n ν ntw −M n ν ntw +S n ν ntw − 4 data, Vntw and mn0w , are from Ljungan historical data. The
k (Qkn ν kntw
S n ν ntw ) + t,l (C l ν 5ltw + C l ν 5ltw ) + t,n∈N-ST∪N THP n ν 7ntw ;
4
P P data for stations 1, 2, 3, 4, 5, and 6 is collected from stations
(1) Flåsjön-Grucken, Lännässjön, Rätan, Turinge, Bursnäs, and
which is a linear reformulation for Enstw . Havern-Mellansjön, respectively.
Reformulation 2: The nonlinear total revenue of strategic
(2) Data from 2009 to 2022 are used for the scenario dependent
hydro units in FCR-N market (Enstw ) can be equivalently parameters. Three scenarios are defined for each year. Data
replaced by a linear sum of upper and lower limits multiplied from other years are used for the years where information
by their corresponding Lagrangian dual variables. was not available. The DA market demands are scaled to fit
Proof: First we start with the original bilinear formulation for the capacity of the available power plants. From (23b ) and
(2)
Enstw = pFC nstw λtw . TheP aims is to find a linear equivalent for
FC
(2)
(23c ), FC demands are always less than DA demands. It is
n∈NST,s,t Enstw .
FC FC
P
ST
n∈N ,s,t p nstw λ tw = enforced in historical data as follows: When Dtw FC DA
> Dntw then
First, the strong duality condition for FCR-N market clearing new value assigned as Dtw = Dntw ×2/3.
FC DA
from Section II-E is written in (27a ).
- s,t,n∈NST bFC FC FC FC Table II
nst pnstw -
P P
t,n∈N-ST∪N TH cntw gntw =
P FC FC P L IST OF SCENARIO DEPENDENT PARAMETERS AND THEIR SOURCE
bFC 1
t Dtw λtw + s,t,n∈NST p̂nst θnstw −
6 DA 7
PARAMETER S OURCE F ROM TO
(2P n ∆ft )/δn +
P P
θntw (P n − ĝntw )θntw Ljungan historical data is obtained
Vntw , mn0w 2009 2018
t,n∈N-ST∪N TH t,n∈N-ST∪N TH using the HBV-model [33]
P 9
θnstw (p̂DA
P 10 DA
(27a)
DA
Dntw Operating Data [32] 1997 Current
nstw ) + θntw (ĝntw );
ntw , Dtw
cF Statistik/FCR [34] 2021 Current
C FC
t,n∈N ST -ST
t,n∈N ∪N TH
cFC , Statistik/Primärreglering [34] 2011 Current
ntw
Similarly, from (24a ), we have pFC FC FC
nstw bnst + pnstw λtw +
FC
ntw , λntw
λID ID Elbas\Elbas ticker data [32] 2010 Current
pnstw θnstw + pnstw θnstw = 0; and from (24b ) we have
FC 1 FC 9
(2)
nst = θnstw pnstw . It gives us Enstw = pnstw λtw =
1
θnstw p̂bFC 1 FC FC FC
FC FC 1 bFC FC
−pnstw bnst − θnstw p̂nst − pnstw θnstw . 9 III. N UMERICAL R ESULTS
Finally the strong duality condition in (27a ) is Numerical results of the proposed model are discussed in six
(2)
rewritten as FC FC
case studies. Overview of the case studies are listed in Table
P P
n∈NST,s,t pnstw λP tw = n∈NST,s,t Enstw =
FC FC 1 bFC
III. Cases I to Case V are used to assess behavior of the
P
− s,t,n∈NSTpnstw bnst − Tθnstw p̂nst
s,t,n∈NSP =
FC FC FC FC proposed model in different conditions and when the size of
P
c gntw + D λ −
Pt,n∈N-ST∪N TH ntw P t tw tw
-ST
t,n∈N ∪N P TH θ 6
ntw (2P n ∆f t )/δ n + -S
t,n∈N ∪NT TH(P n − the problem changes.
t,n∈N-ST∪N TH θntw (ĝntw ) which is a linear
DA 7 10 DA
ĝntw )θntw +
(2)
reformulation for Enstw . A. Case I: (Illustrate Market Clearing)
The McCormic envelopes could be used to have a convex A simplified version of the proposed model is used in this
(3)
relaxation for Entw = gntw θntw where 0 ≤ gntw
DA 7 DA
≤ P n and section to illustrate DA and FCR-N market clearing. All the
(3)
0 ≤ θntw ≤ M which are written in (28). By using Entw
7 17
constraints related to ID market and water flow are removed
instead of gntw θntw in (25a ), the proposed model becomes
DA 7
from detail formulation in Section II. As listed in Table III, for
Table III Table IV

OVERVIEW OF THE MODEL SETUP IN THE CASE STUDIES G ENERATION P ORTFOLIO AND M ARKET C LEARING P RICES IN C ASE I
D EMAND G ENERATION
C ASE
w/o Net. w/o Net. N ETWORK

NN NST ST TH NT NW NL D EMONSTRATION GOAL
DA FCR-N DA FCR-N DA FCR-N
FC
I 3 1 1 1 1 1 2 Illustrate Market Clearing [MWh] [MW] [MWh] [MW] [e/MWh] [e/MW]
II 3 1 1 1 1 1 2 Illustrate Transmission Network
Market Interaction of HPP and H (50, 50, 70)i NA (20, 50, 100) NA (200)ii NA
w/ FC w/o FC
III 3 1 1 1 3 1 2 M (50, 50, 40) NA (90, 50, 0) NA (15) NA
Water Value
IV 3 1 1 1 24 1 2 Market Power Exercise L (4, 5, 25) NA (0, 34, 0) NA (0) NA
V 118 14 1 4 24 20 117 Large Scale H (50, 50, 70) 20iii (20, 50, 100) (20, 0, 0) (200) (100)
M (50, 50, 40) 20 (85, 50, 5) (15, 0, 5) (15) (100)
NN: Number of buses (NN); NST: Number of non-strategic HPP L (4, 5, 25) 20 (34, 0, 0) (20, 0, 0) (0) (100)
(NN(-ST) ); ST: Number of strategic HPP (NN(ST) ); TH: Number of
non-strategic thermal units (NN(TH) ); NT: Number of time steps (NT); i) (ST, NST, TH) different values for each unit; ii) (x)=(x,x,x) same
NW: Number of time scenarios (NT); NL: Number of lines (NL); for all units; iii) FCR-N market demand is not unit-specific; H: High;
M: Medium; L: Low; NA: Not applicable; w/ Net.: with NTC limits;
w/o: without NTC limits; Bold: marginal producer.
simplification, we have assumed that all sets of indices except
N and L have one member. Also, there is one scenario with ST unit is marginal producer. It leads to price of 15 e/MWh
probability one. There are three units connected together. Units for total demands 50 to 150 MW as the ST unit does not
1, 2, and 3 are ST, NST, and TH, respectively. Generation bid higher than marginal cost of TH unit cDAn = 15 e/MWh.
portfolio and market clearing prices with high, medium, and (3) When the total DA demand is higher than 150 MW, NST
low demands are presented in Table IV. There are two main and TH units can not be the marginal producer as they have
parts with/without FCR-N market. reached their maximum capacity. Therefore, ST unit bids to
DA clearing without FC: the maximum price of 200 e/MWh.
Low demand: NST unit is cleared by the market operator due FCR-N price: The DA market demands for (ST, NST, TH)
to its zero marginal cost. Therefore, DA prices λDA ntw are all units are fixed to (44.1, 44.1, 61.8) MW while the FCR-N
zero. market demand is changed from zero to 100 MW. Due to
Medium demand: In DA market, the demand is higher than (23b ) and (23c ), generation for the DA market should be
the total capacity of NST unit and ST unit takes over the higher than the FCR-N market. (1) When the total FCR-N
generation but it bids as high as the cost of TH unit to make demand is less than 50 MW, NST unit generates maximum
sure it is cleared. Therefore, the price is 15 e/MWh. amount of P 3 = 50 MW for the DA market and TH unit
High demand: In DA market, demand is more than the total generates for FCR-N market with marginal price of TH unit
capacity of ST and NST units which results in the dispatch
ntw = 30 e/MWh. (2) When the total FCR-N demand is
cFC
of TH unit. The ST unit is the price-maker and bids as between 50 and 100 MW, NST and TH units are not marginal
much as possible, which is the price cap of 200 e/MWh. producer as they are in their maximum capacity. Therefore,
Therefore, even with a smaller power generation, it can earn the ST unit bids to the maximum price of 100 e/MWh.
more compared to the previous case, 20×200 > 100×15.
DA clearing with FC: The DA demands are the same as the
200 NST
previous part but the FCR-N demand is 20MW.
1. DA price
[ e/MWh]
TH
Low demand: The ST unit bids the required demand in the DA 100
ST
market to have enough margin to be dispatched in the FCR-N D
0
market (23a ).
2. FCR-N price
Medium demand: In this demand level, after dispatching all 100 TH

[ e/MW]
ST
the capacity of NST unit, ST unit takes over the generation 50
D
by bidding up to the TH unit variable cost and reserving some
0
capacity for FCR-N market. Thus, TH unit is the price-maker
0 25 50 75 100 125 150 175 200 225 250
in the DA market, while in the FCR-N market, ST unit is the Cumulative power [MW]
marginal producer and sets the prices to the price cap.
High demand: In this demand level, NST and TH units are Figure 4. Merit order list in Case I (Illustrative Market Clearing). D:
dispatched in full in the DA market and that makes the ST total demand; NST: non-strategic units; TH: non-strategic thermal units; ST:
strategic units.
unit the price-maker for both DA and FCR-N markets.
Fig. 4 shows the merit order list of all units in Case I.
This case study shows that the strategic unit exercises the
Capacity of ST, NST, and TH units are 100, 50, and 100 MW,
market power for the DA market when the demand is high.
respectively.
This impact is more pronounced when it participates in the
DA price: The DA market demand (50, 50, 70) MW for (ST,
FCR-N market.
NST, TH) units are scaled while the FCR-N market demand
is set to zero. (1) When the total DA demand is less than 50
MW, NST unit with zero marginal price sets the market price B. Case II: (Illustrate Transmission Network)
to zero e/MWh. It is what happened at L demand in Case I In this case study, we investigate the effects of the transmission
before. (2) When the total DA demand is higher than 50 MW, network on results. Similarly, generation portfolios and prices
10
are investigated on high, medium, and low demands and results 100
1. Volume Bid
are listed in Table V. The net transfer capacity (NTC) of Line 80 pbD
1
A
[MW]
1 is limited to 20 MW while Line 2 is still 100 MW. 60
40
pbF
1
C
DA clearing without FC: Low demand: Line flows are less 20

than NTC which leads to no line congestion and the same 0
200
results as the case without transmission bottleneck. bD A
2. Market Prices
1
150
Medium demand: In the DA market, the ST unit imports bFC
[ e/MW]
1
20MW through Line 1 and the TH unit can export it through 100 λD1
A
Line 2. Hence, the prices for buses 2 and 3 is set to 15 e/MWh 50

DA DA
λ3 ,λ4
as the variable cost of TH unit. However, the ST unit in bus 1 0
FC
λ
acts as the price-maker and pushes the price to the price cap
3. Cleared Power
200 pD A
g3DA
200 e/MWh due to the congestion in line 1.
1
[MW]
g4DA pFC
High demand: As the demand grows, the previous situation 100
1
g2FC g3FC
remains as the TH unit is the marginal producer afterward in
0
Bus 2 and 3 while unit 1 is the price-maker in Bus 1. 0 20 40 60 80 100 120 140 160 180 200 220
DA clearing with FC: Low demand: The ST unit bids zero Total demand [MW]
in the DA market and alongside the NST unit, they meet the
demand. But as the NST unit dispatch in the FCR-N market Figure 5. Bids of the ST unit in Case II with scaled total demand.
is limited to the DA dispatch, the ST unit is the marginal
producer and price-maker in the FCR-N market.
Medium demand: Activated bottleneck in Line 1 makes the In this case, the impact of transmission-line congestion line has
ST unit as the marginal producer in Bus 1 and TH unit in Bus been assessed. The results show that the strategic unit bidding
2 and 3 in the DA market. In FC, the ST unit bids under the behavior is to congest the line and to exercise its market power
variable cost of the TH unit to be dispatched. by increasing the price of its node.
High demand: In the high demand, the TH unit remains a
marginal producer in Bus 2 and Bus 3 in the DA market. In C. Case III (Markets Interaction of HPP and Water Value)
the FCR-N market, due to the limited capacity of the TH units, In this case study, we look at interaction of HPPs with the
the ST unit acts as the marginal producer and sets the price markets considering value of the stored water. Structure and
again to the cap. Bid price and volumes of the ST unit in Case numerical results of the power system and the water network
is shown in Fig. 6. It includes three HPPs including on ST
Table V unit at bus 1, one NST unit at bus 2, and one TH unit at bus
G ENERATION P ORTFOLIO AND M ARKET C LEARING P RICES IN C ASE II
3. Water flows between the reservoirs from bus 1 to bus 2. We
D EMAND G ENERATION λ focused on explaining the strategic actions of the target plants.
w/ Net. w/ Net. N ETWORK
DA FCR-N DA FCR-N DA FCR-N Results for congested transmission lines are studied before in
FC
[MWh] [MW] [MWh] [MW] [ e/MWh] [e/MW]

Case II. To simplify, we choose C l = 200 MW which is large
H (50,50,70)i NA (30, 50, 90) NA (200,15,15) NA enough to avoid congestion. Similarly, water flow time from
w/ FC w/o FC
M (50,50,40) NA (30, 50, 60) NA (200,15,15) NA station 1 to downstream station 2, τj , is set to zero. To see how
L (4,5,25) NA (0, 34, 0) NA (0)ii NA
H (50,50,70) 20iii (30, 50, 90) (10, 0, 10) (200,15,15) (100) the impacts of high water value influence the strategic action
M (50,50,40) 20 (30, 50, 60) (20, 0, 0) (200,15,15) (30) of ST unit, we have set the water value to a high number for
L (4,5,25) 20 (24, 10, 0) (10, 10, 0) (0) (100) this case.
i) (ST, NST, TH) different values for each unit; ii) (x)=(x,x,x) same Parameters: In this case, different ID price scenarios and load
for all units; iii) FCR-N market demand is not unit-specific; H: High; levels have been used to test the reaction of the ST unit in
M: Medium; L: Low; NA: Not applicable; w/ Net.: with NTC limits;
different situations. The rest of the parameters are fixed over
w/o Net.: without NTC limits; Bold: marginal producer in bus 1;
Underline: marginal producer in buses 2 and 3. time as shown in Fig. 6. Water inflow to units one and two, V1t
and V2t , are 10 and 20 m3 , respectively; FCR-N demand, Dtw FC
,
II with C 1 = 20 MW and C 2 = 100 MW, are shown in Fig. is 20 MW, thermal costs, cn and cntw , are 48 and 50 e/MWh;
DA FC
5. Total DA demands (50, 50, and 70 MW for ST, NST, and w , is 26 e/MWh and expected future
future electricity price, λF
TH units with generation capacities 100, 50, and 100 MW, production equivalent, µF j is 0.9 MWh/m .
3
respectively) and FCR-N demands of 20 MW are scaled by Results: As shown in Fig. 6, the ST unit tries to discharge
0%, 10%, . . . , and 120%. In total demands less than 57 MW, as much as possible to gain more revenue by exercising the
NST unit is able to generate the DA demand. Therefore, DA market while the market operator seeks to use the water as
price bids are at zero e/MWh. If total demands of 76 MW efficiently as possible and save the water in the NST unit
and above, NST unit generates 50 MW in the DA market. It is reservoir; however, a proper decision-making framework is
up to the ST and TH units to generate the remaining. The ST required to determine which market is the best option to sell
unit bids 200 e/MWh in DA market and cFC ntw in the FCR-N as follows:
market and increases the bid volume, accordingly. It leads to Time Step 1: In time step 1, Strategic Unit 1 submits bids
different prices at each bus as C 1 =20 MW, λDA 1 = 15 and for thermal cost prices in the DA market, competing against
λDA
2 = 30. Thermal Unit 3 for clearance. To achieve this, Unit 1 procures
11
30 MW from the ID market due to the favorable relationship pID-

1t pDA FC
1t , p1t pID+
1t
DA
g2t FC
, g2t DA
g3t FC
, g2t
between expected ID and DA prices. Consequently, the cleared λID
ntw
prices are established at λDA = 48 EUR/MWh and λFC = 50 1:ST 1:pL
1t 2:NST 2:pL
2t 3:TH DA
D3t ,
Case III
EUR/MW, mirroring the thermal costs, i.e., cDA n = 48 EU-
λD A FC
WI 1t ,λt λDA
2t λD A
3t DtFC
V2t
R/MWh and cFC ntw = 50 EUR/MWh. Given the high water V1t
value in the scenario, the market operator optimizes water Dam 1 q1t Dam 2 q2t
resource allocation, leading to the fulfillment of demand by the m1t s1t m2t s2t
TH and ST units in the DA market. Additionally, owing to the 30 58, 10 0 0, 0 12, 0

lower ID price during this period, the ST unit acquires 30 MW 40
to limit discharge and conserve water for future utilization. 1:ST 1:58 2:NST 2:58 3:TH 70,
Time Step 2: Subsequently, in time step 2, the projected ID
t=1
WI 48,50 48 48 10
market price surpasses the thermal costs, prompting Strategic 20
10
Unit 1 to stop buying from the ID market and instead selling 47 0
15 MW to it. Despite this alteration, the market operator, 263 0 366 0
acknowledging the water’s high value, continues to dispatch
0 40, 10 15 0, 0 50, 0
the TH unit, ensuring water preservation within the NST unit.
49
While this action propels the ST unit to elevate prices to the
1:ST 1:40 2:NST 2:40 3:TH 90,
market cap in both markets, the decision remains advantageous
t=2
WI 200,100 200 200 10
relative to scenarios where the NST unit is dispatched. 20
10
Time Step 3: Time step 3 witnesses a situation where the 92 0
demand exceeds the combined capacities of the TH and ST 0 478 0
182
units, necessitating the activation of the NST unit. The NST
unit’s generation capabilities enable its participation in the 0 25, 10 30 45, 0 50, 0
FCR-N market, causing a transition in the ST unit’s role from 55

1:25 2:70
a price maker to a price taker in this domain. Consequently, 1:ST 2:NST 3:TH 120,
t=3
200,50 200 200 10

the cleared price for the FCR-N market is determined at 50 WI
20
EUR/MWh, corresponding to the production cost facilitated 10
92 90
by the TH unit. 500
0 0
This example showcases the delicate strategic actions of the 100
ST unit in response to the interplay between the value of stored
water and ID market dynamics. By leveraging ID market Figure 6. Schematic and numerical results in Case III. Water flow: dotted
arrow; Electric power flow: solid arrow; ST: strategic HPP; NST: non-strategic
trading, the ST unit adjusts its water discharge strategy to align HPP; TH: non-strategic thermal power plant; WI: water inflow; mn0w = 300
with prevailing market prices—conserving water for future use m3 .
when ID prices are low by purchasing from this market, and
maximizing revenue by selling power at higher prices when ID
prices increase. This strategic behavior not only optimizes the (time steps 3 to 5), and selling to it when demand is low
ST unit’s market participation but also illustrates the critical and IDP prices are high (time steps 11 to 13). A new variable
pDA s,n=1 pnstw is used to save space.
DA
role of market signals in guiding the operational decisions of 1t =
hydro power plants. The conclusion from the study emphasizes the adaptability
and strategic planning of the ST unit in response to market
signals and operational constraints. This adaptability allows
D. Case IV: (Market Power Exercise) the ST unit to optimize its market positions, balancing between
In this case study, we increase the number of time steps to purchasing at advantageous times and selling when market
NT = 24 to assess the performance of participating in the conditions favor higher returns, all while considering the
DA, ID, and FCR-N markets, as shown in Fig. 7. underlying value of water resources.
Firstly, demand and expected ID price profiles are shown. For
the sake of completeness, ID prices fluctuate both in low and
high-demand periods. E. Case V: (Large Scale)
Secondly, we analyze prices and dispatched power when the The IEEE 118-bus system is used for Case V. It has 186 lines,
water value is relatively low (λF w = 20 e/MWh). Higher 4,242 MW loads, 4,377 MW generators, and 18 buses. Boxplot
demand periods, like time steps 7-9, lead to increased prices results are shown in Fig. 9. Schematic of the water network
in DA markets, primarily due to constrained capacity in NST for Case V is shown in Fig. 8. Data for water inflows and
and TH units. Consequently, the ST unit acts as a price maker water level are explained in Section II-I. There are one ST
during these times. Similar trends are observed in the FCR-N and five NST units which are connected to buses 69, 12, 25,
prices, particularly pronounced in bus 1 due to the ST unit 26, and 31, respectively. The remaining units are considered
and its susceptibility to line congestions. TH units. FCR-N market prices are relatively more volatile at
The ST unit strategically engages with the ID market, pur- period t = 1 to 7 when DA market demands can be relatively
chasing from it when DA prices are low and demand is high lower. On the other hand, when there is a higher demand in
12
3. Dispatched power 2. Cleared prices 1. Price/demand profile at t = 1. (2) highest probability to have prices less than 12
1
DA
Dntw
e/MW is between 10 and 19.
DA |
|Dntw Secondly, looking at the type of PDF functions, the probability
of having prices in range of 30-36 e/MW is similar in t = 1
[p.u.]
0.5 λID
ntw
|λID
ntw | and t = 13. Prices are always less than 36 e/MW at t = 13
0 with a narrower PDF. But prices can vary between 6 and 60
200
λDA e/MW at t = 1 with a wider PDF. Therefore, t = 13 is more
promising in terms of more stable FCR-N prices.
1t
[ e/MW]
150 λDA
Therefore, PDF figures help power plants deal with temporal

2t
100 λDA
3t
λF C price risks and hence their operational decisions are statisti-
50 t
cally reliable as they are based on the available PDFs using
100
pDA available historical data. Similarly, PDF of the cleared FCR-N
80 1t
pFC
t=1 t=5 t=9
[MW]
60 1t
pID+
40 ntw 0.06 PPD 0.06 PPD PPD
20 pID-
ntw
0.04 OD 0.04 OD 0.10 OD
2 4 6 8 10 12 14 16 18 20 22 24 0.02 0.02 0.05
Time t [h]
0.00 0.00 0.00
0
6
12
18
24
30
36
42
48
54
60
0
6
12
18
24
30
36
42
48
54
60
0
6
12
18
24
30
36
42
48
54
60
Figure 7. Numerical results in Case IV (Market Power Exercise). t=13 t=17 t=21
PPD PPD PPD
0.10 OD 0.10 OD 0.10 OD
0.05 0.05 0.05
1:ST 2:NST 3:NST 4:NST 5:NST 6:NST
λD A FC
λDA
λDA
λDA
λDA
λDA 0.00 0.00 0.00
1t ,λt 2t 3t 4t 5t 6t
WI 0
6
12
18
24
30
36
42
48
54
60
0
6
12
18
24
30
36
42
48
54
60
0
6
12
18
24
30
36
42
48
54
60
V2t V3t V4t V5t V6t Figure 10. PDF of cleared prices of FCR-N market λF tw in Case V for
C
V1t different time steps; PPD: Posterior predictive distribution; OD: Observed
Dam 1 q1t Dam 2 q2t Dam 3 q3t Dam 4 q4t Dam 5 q5t Dam 6 data.
m1t s1t m2t s2t m3t s3t m4t s4t m5t s5t m6t
market prices are shown in Fig. 11. There are relatively higher
Figure 8. Schematic of Case V water network. Water flow: dotted arrow ST:
prices in 2017 and 2019 with higher probability in 2019.
strategic hydro power plant, NST: non-strategic hydro power plant, WI: water
inflow. year=r2012 year=r2015 year=r2017
0.10
0.2 PPD 0.15 PPD PPD
OD OD OD
0.10 0.05
DA market, prices in FCR-N market drop significantly as for 0.1
0.05
t = 10 to 19.
0.0 0.00 0.00
0
6
12
18
24
30
36
42
48
54
60
0
6
12
18
24
30
36
42
48
54
60
0
6
12
18
24
30
36
42
48
54
60
year=r2018 year=r2019 year=r2021
0.15
0.2
1. Demand
2 PPD 0.075 PPD PPD

[MW]
1
DA
Dntw OD OD 0.10 OD
0.1 0.050
0 0.025 0.05
80
0.0 0.000 0.00
[ e/MWh]
60
3. Cleared prices 2. Price
0
6
12
18
24
30
36
42
48
54
60
0
6
12
18
24
30
36
42
48
54
60
0
6
12
18
24
30
36
42
48
54
40
60
λID
ntw
20 Figure 11. PDF of cleared prices of FCR-N market λF tw in Case V in different
C
0 years; PPD: Posterior predictive distribution; OD: Observed data.
60
[ e/MW]
40 The McCormic envelopes used in the proposed model in (28)

|λFC
tw | (3) (4)
20 and (29) instead of Entw = gntw θntw and Entw = gntw
DA 7
θntw ,
DA 10
0 respectively. Tightness of the McCormic envelopes in Case I

2 4 6 8 10 12 14 16 18 20 22 24
Time t [h] to Case V are validated by looking at the numerical results.
Results show that the equations (28) and (29) are always valid
(3) (4)
Figure 9. Boxplot results in Case V (Large Scale). and the errors, Entw − gntw θntw and Entw − gntw
DA 7
θntw , are
DA 10
less than 1.90425 × 10 −12

which is smaller than the CPLEX
The PDFs of cleared prices in the FCR-N market, i.e. λFC tw , in solver optimality tolerance 1.0 × 10−6 .
Case V (Large Scale) are shown in Fig. 10. Complexity of the proposed MIP model in Case IV and Case
Firstly, this figure provides probabilistic information about V are studied by looking at number of (equations, continuous
prices for different time steps such as when there is the highest variables, and integer variables) which are (5040, 3433, and
probability to have a given price range. For instance, (1) 1152) and (512833, 349873, and 127944), respectively. This
highest probability to have prices more than 48 e/MW is model is solved with CPLEX commercial solver and the
13
computation times are 4 seconds and 2.2 hours, respectively. R EFERENCES

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and the Research and Research Development grant number Berlin, Heidelberg: Springer Berlin Heidelberg, 2010, pp. 33–55.
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14
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I. Stenkløv, “Assessing the benefits of exchanging spinning reserve degrees from the University of Tehran, Tehran, Iran,
capacity within the hydro-dominated nordic market,” Electric Power in 2011 and 2017, respectively and the M.Sc. degree
Systems Research, vol. 199, p. 107393, 2021. [Online]. Available: from the Southern Methodist University, Dallas,
https://www.sciencedirect.com/science/article/pii/S0378779621003746 Texas, USA, in 2019. He is currently working toward
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producer under uncertainty: Modified benders approach,” IEEE Trans- Energy Systems, School of Electrical Engineering
actions on Power Systems, vol. 33, no. 1, pp. 861–873, Jan 2018. and Computer Science, KTH Royal Institute of
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and mitigation in hydrothermal systems,” IEEE Transactions on Power
B.Sc. degree in electric power engineering from the
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Isfahan University of Technology, Isfahan, Iran, and
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the M.Sc. degree in power system engineering from
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Royal Institute of Technology, Stockholm, Sweden.
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[28] K. Poplavskaya and F. Leimgruber, “Analysis of the swedish fcr-
n market design—effects of transition to marginal pricing and free Priyanka Shinde (Member, IEEE) received the
bidding,” AIT Austrian Institute of Technology GmbH, Wien, Austria, Master of Science degree in power systems engineer-
Technical Report Commissioned by Svenska kraftnät, 2021. ing in 2017 from the Indian Institute of Technology
[29] Y. Liu, L. Wu, Y. Yang, Y. Chen, R. Baldick, and R. Bo, “Secured Madras, Chennai, India. In 2023, she completed her
reserve scheduling of pumped-storage hydropower plants in iso day- Ph.D. thesis titled ‘Efficient trading in the short-term
ahead market,” IEEE Transactions on Power Systems, vol. 36, no. 6, pp. electricity markets for integration of renewable en-
5722–5733, Nov 2021. ergy sources’ with the School of Electrical Engineer-
[30] M. D. Hoffman, A. Gelman et al., “The no-u-turn sampler: adaptively ing and Computer Science at KTH Royal Institute
setting path lengths in hamiltonian monte carlo.” J. Mach. Learn. Res., of Technology, Stockholm, Sweden. Her research
vol. 15, no. 1, pp. 1593–1623, 2014. work has been recognized by several national and
[31] D. Khastieva, S. Mohammadi, M. R. Hesamzadeh, and D. Bunn, international awards. Currently, she is working as
“Optimal transmission investment with regulated incentives based upon the Nordic Market Expert at Montel Group. Her role includes building and
forward considerations of firm and intermittent resources with batteries,” enhancing efficient decision-making tools for different types of energy market
IEEE Transactions on Power Systems, vol. 36, no. 5, pp. 4420–4434, participants, energy market analysis, research on energy market design, to
Sep. 2021. name a few.
[32] NordPool. Market data. [Online]. Available: https://www.nordpoolgroup.
com/en/Market-data1
[33] S. Bergström et al., “The hbv model.” Computer models of watershed
hydrology., pp. 443–476, 1995.
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om-kraftsystemet/kraftsystemdata/elstatistik
Evelin Blom (Member, IEEE) received her MSc in

Engineering Mathematics in 2018 from Chalmers
University of Technology, Gothenburg, Sweden; and
her PhD in Electrical Engineering from the KTH
Royal Institute of Technology, Stockholm, Sweden
in 2023. Her main research interest includes the
optimization of energy systems, electricity market
analysis, and integration of renewable energy.
15
Mohammad Reza Hesamzadeh (SM’13) is pro-

fessor of energy markets and regulation at KTH
Royal Institute of Technology, Sweden. He received
his Docent (Higher Doctorate) from KTH Royal
Institute of Technology and his PhD from Swinburne
University of Technology, Australia, in 2013 and
2010, respectively. He was a Post-Doctoral Fellow
at KTH in 2010-2011. He is a Faculty Affiliate at
Program on Energy and Sustainable development
(PESD), Stanford University and Research Affiliate
at German Institute for Economic Research (DIW
Berlin). He is also Faculty Affiliate at KTH Climate Action Centre and KTH
Digital Futures and a Research Advisory Council member of KTH Integrated
Transport Research Lab (ITRL). Prof. Hesamzadeh is a senior member of
IEEE, and a member of informs, IAEE and Cigre. He has won several
awards for his papers in different professional events and conferences. He has
published two books and numerous papers on electricity market design and
analysis. He also served as editor of IEEE Transactions on Power Systems and
Guest Editor of several other journals. Prof. Hesamzadeh has been providing
advice and consulting services on different energy market issues to both
private and government sections over the last several years. His areas of
interest include energy market, applied mathematics, and operations research.
He is currently in the editorial board of IEEE Transactions on Energy Market,
Policy and Regulation.
Lennart Söder (M’91, SM’10) was born in Solna,

Sweden, in 1956. He received the M.Sc. and Ph.D.
degrees in electrical engineering from the KTH
Royal Institute of Technology, Stockholm, Sweden,
in 1982 and 1988, respectively. He is currently
a Professor of Electric Power Systems with the
KTH Royal Institute of Technology. His current
research interests include power system operation
and planning, integration of wind and solar power,
hydropower system modeling, demand side manage-
ment, distribution systems, power system reliability,
power markets and regulation

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This article has been accepted for publication in IEEE Transactions on Energy Markets, Policy, and Regulation.

Probabilistic Multi-product Trading of Hydro Power

ntw /λntw ID market prices ( e/MWh);

Table I II. P ROPOSED B ILEVEL F ORMULATION FOR

Non-Strategic (NST) Units: We have two non-strategic units

the related body of literature as follows:

a bivariate bid curve analysis, allowing for variable offer

The above objective function is subjected to the following

paper. Power volumes in the ID market are relatively smaller

Each state within the proposed NUTS-based algorithm is 17:

An approach similar to [31] is implemented here to remove P

Table III Table IV

w/o Net. w/o Net. N ETWORK

Medium demand: In this demand level, after dispatching all 100 TH

DA clearing without FC: Low demand: Line flows are less 20

Line 2. Hence, the prices for buses 2 and 3 is set to 15 e/MWh 50

[MWh] [MW] [MWh] [MW] [ e/MWh] [e/MW]

30 MW from the ID market due to the favorable relationship pID-

TH and ST units in the DA market. Additionally, owing to the 30 58, 10 0 0, 0 12, 0

FCR-N market, causing a transition in the ST unit’s role from 55

200,50 200 200 10

Therefore, PDF figures help power plants deal with temporal

2 PPD 0.075 PPD PPD

40 The McCormic envelopes used in the proposed model in (28)

0 respectively. Tightness of the McCormic envelopes in Case I

less than 1.90425 × 10 −12

computation times are 4 seconds and 2.2 hours, respectively. R EFERENCES

Evelin Blom (Member, IEEE) received her MSc in

Mohammad Reza Hesamzadeh (SM’13) is pro-

Lennart Söder (M’91, SM’10) was born in Solna,

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