Price and procurement optimization in hybrid competitive power supply chain under different bidding strategies

Abstract Power retailers procure electricity from generators and sell it at government-guided prices. Renewable energy electricity and fossil-fueled electricity compete in the market, with the government providing subsidies for renewable energy consumption. The price and procurement optimization of the hybrid competitive power supply chain under different bidding strategies contributes to the sustainable development of the power industry. The main findings of this study show that the total profit of the supply chain under the simultaneous bidding model is closest to that of the centralized supply chain, and the retailer’s profit is maximized in this scenario. Regardless of the bidding model used, the on-grid wholesale prices for renewable energy electricity and fossil-fueled electricity remain equal. An increase in the government subsidy for renewable energy integration leads to a reduction in the on-grid wholesale price for renewable energy electricity, which encourages the retailer to increase its procurement of renewable energy electricity. As a result, the fossil-fueled generator feels competitive pressure and slightly lowers its price, but this does not lead to an increase in the retailer’s procurement of fossil-fueled electricity. As competition intensifies, all three bidding models lead both generators to choose a wholesale price reduction strategy, with the largest price reduction observed in the simultaneous bidding model. Interestingly, the retailer’s procurement quantities for both renewable energy electricity and fossil-fueled electricity will first decrease and then increase.