We supported one of the largest Italian generators participating in auctions for reliability-options in the Italian market, designing a strategy that maximizes the benefit for the company’s portfolio while ensuring that a minimum revenue target is met.
As part of the project we assessed the competitive scenario in the Italian auctions for reliability options. This required, in particular, to simulate the complex algorithms used by the Italian system operator to set the maximum volume of options that each generator is eligible to offer in the auction.
We developed a game-theoretic analysis of the auction design, simulating the auction’s outcome based on alternative assumptions on the main players’ bidding strategy and the characterization of our client’s optimal bidding strategy.
Finally, we delivered the client a Excel-based dashboard to support bidding decisions during multi-round auctions: based on the results of each round of the auction, the tool infers the main players’ bids and computes our client’s expected payoffs under alternative bidding strategies. Further, the tool monitors the impact of the activity rule on the set of bidding options available to our client.
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