  This paper presents a framework to solve the strategic bidding problem of
participants in an electricity market cleared by employing the full AC Optimal
Power Flow (ACOPF) problem formulation. Traditionally, the independent system
operators (ISOs) leveraged DC Optimal Power Flow (DCOPF) problem formulation to
settle the electricity market. The main quest of this work is to find what
would be the challenges and opportunities if ISOs leverage the full ACOPF as
the market-clearing Problem (MCP)? This paper presents tractable mathematical
programming with equilibrium constraints for the convexified AC market-clearing
problem. Market participants maximize their profit via strategic bidding while
considering the reactive power dispatch of generation units. The equilibrium
constraints are procured by presenting the dual form of the relaxed ACOPF
problem. The strategic bidding problem with ACOPF-based MCP improves the
exactness of the location marginal prices (LMPs) and profit of market
participants compared to the one with DCOPF. It is shown that the strategic
bidding problem with DCOFP-based MCP is unable to model the limitations of
reactive power support. The presented results display cases where the proposed
strategic bidding method renders $52.3\%$ more profit for the Generation
Company (GENCO) than the DCOPF-based MCP model. The proposed strategic bidding
framework also addresses the challenges in coupling real and reactive power
dispatch of generation constraints, ramping constraints, demand response
implications with curtailable and time shiftable loads, and AC line flow
constraints. Therefore, the presented method will help market participants
leverage the more accurate ACOPF model in the strategic bidding problem.
