Nonlinear Complementarity Approach to Capacity Allocation Problem in Reserve Markets

Abstract

In competitive electric reserve markets, the suppliers face the optimal allocation problem of their reserve capacities in order to purse their profit maximizing. Under this background, we develop a capacity allocation model as nonlinear programming. Nonlinear complementarity method is utilized to search for the optimal solution. And smoothing technique is applied to get a system of smooth equations, which can be solved by the Newton method. Numerical result shows the validity of the method.