Optimal bidding strategy for integrated CHP system by modified heuristic algorithm considering CO 2 emission in energy and reserve markets

Purpose This study aims to solve optimal pricing and power bidding strategy problem for integrated combined heat and power (CHP) system by using a modified heuristic optimization algorithm. Design/methodology/approach In electricity markets, generation companies compete according to their bidding parameters; therefore, optimal pricing and bidding strategy are solved. Recently, CHP units are significantly operated by generation companies to meet power and heat, simultaneously. Findings For validation, it is shown that profit is improved by 0.04%–48.02% for single and 0.02%–31.30% for double-sided auctions. As heat price curve is extracted, the simulation results show that when CHP system is integrated with other units results in profit increase and emission decrease by 3.04%–3.18% and 2.23%–4.13%, respectively. Also, CHP units significantly affect bidding parameters. Originality/value The novelties are pricing and bidding strategy of integrated CHP system is solved; local heat selling is considered in pricing and bidding strategy problem and heat price curve is extracted; the effects of CHP utilization on bidding parameters are investigated; a modified heuristic and deterministic optimization algorithm is presented.