## 2 Materials and Methods
### Dynamic Bidding of Generators and Traders in Interconnections Subsection  
#### 2.1.1 Generators Bidding  
The bidding strategy for the thermal units from the different market participants is done dynamically in the model, considering the capability of the market participants to adopt a scarcity pricing strategy. This is decided based in the expected \"net demand\" for each hour (t):  
\[\begin{array}{l}\textbf{Net\_demand}_{t}=Nominal\_demand_{t}-Renewables_{t}- Hydro\_production_{t}-\\ Energy\_to\_Bilateral\_Contracts_{t}-Tech\_minimum\_of\_the\_available\_DPP\_units_{t}-\\ Expected\_Net\_Imports\end{array}\]  
where:  
\[\textbf{Net\_demand}_{t}\]  
: Net demand during each time period t (MWh)  
\[\textbf{Nominal\_demand}_{t}\]  
: Nominal demand during each time period t (MWh)  
\[\textbf{Renewables}_{t}\]  
: Total renewable energy generation during each time period t (MWh)  
\[\textbf{Hydro\_production}_{t}\]  
: Total hydroelectric energy generation during each time period t (MWh)-this is the result of the initial model execution, determining the hourly allocation of the total daily hydroelectric production, based on the declared total daily production of hydroelectric units (in MWh).  
\[\textbf{Energy\_to\_Bilateral\_Contracts}_{t}\]  
: Committed quantity for bilateral contracts (MWh)  
\[\textbf{Tech\_minimum\_of\_the\_available\_PPC\_units}_{t}\]  
: Sum of the technical minimum of all the available units from the Dominant Power Producer (DPP) (not included in bilateral contracts), both lignite-fired and natural gas-fired combined cycle units (MWh)  
\[\textbf{Expected\_Net\_Imports}\]  
: Hourly net imports (positive number, while if there are net exports, they are represented by a negative number) multiplied by a specific coefficient (75% in our case)--this is the result of the initial model execution, determining the hourly cross-border electricity flows (net imports or exports) with each interconnected system (MWh).  
Based on the hourly \"net demand\" estimation, the model calculates the sum of technical minimums of the available thermal units owned by independent power producers (IPPs) and compares that number (IPP_tech_min) with the resulting (Net_demand) during each hourly time period and representative day.  
The following cases arise from that comparison:  
If \(\textbf{Net\_demand}_{t}<\)0, then the whole capacity of IPPs is offered at their MAVC.  
If \(\textbf{Net\_demand}_{t}>\) 0 and \(\textbf{Net\_demand}_{t}<\textbf{IPP\_tech\_min}\), then the whole capacity of IPPs is offered at their MAVC.  
\[\textbf{Net\_demand}_{t}>\]  
: and \(\textbf{Net\_demand}_{t}>\textbf{IPP\_tech\_min}\) and \(\textbf{Net\_demand}_{t}<\textbf{IPP\_tech\_min}\) + Additional capacity (above the technical minimum) of DPP units, then the model implements a sorting among the MAVC of all these units and the IPPs employ the most possible aggressive strategy (offer submission smaller by 1 cent than the MAVC of the next most expensive lignite-fired unit), if they are more economical than the DPP units (depending on the resulting merit order).  
\[\textbf{Net\_demand}_{t}>\]  
: AND \(\textbf{Net\_demand}_{t}>\textbf{IPP\_tech\_min}\) AND \(\textbf{Net\_demand}_{t}>\textbf{IPP\_tech\_min}\) + Additional capacity (above the technical minimum) of DPP units, then the second step of each IPP unit (eight IPs totally, five natural gas-fired combined cycle and three lignite-fired units) is considered to be extremely high, namely the most economical unit submits an offer at 3000/(number of available IPPs) \(\boldsymbol{\upxi}\)/MWh, the second most economical unit at 2 \(\times\) 3000/(number of available IPPs) \(\boldsymbol{\upxi}\)/MWh, while the last available unit, which is the most expensive one, submits its remaining capacity, above its technical minimum, at 3000 \(\boldsymbol{\upxi}\)/MWh.