Domain-adapted Learning and Imitation: DRL for Power Arbitrage

Abstract: In this paper, we discuss the Dutch power market, which is comprised of a day-ahead market and an intraday balancing market that operates like an auction. Due to fluctuations in power supply and demand, there is often an imbalance that leads to different prices in the two markets, providing an opportunity for arbitrage. To address this issue, we restructure the problem and propose a collaborative dual-agent reinforcement learning approach for this bi-level simulation and optimization of European power arbitrage trading. We also introduce two new implementations designed to incorporate domain-specific knowledge by imitating the trading behaviours of power traders. By utilizing reward engineering to imitate domain expertise, we are able to reform the reward system for the RL agent, which improves convergence during training and enhances overall performance. Additionally, the tranching of orders increases bidding success rates and significantly boosts profit and loss (P&L). Our study demonstrates that by leveraging domain expertise in a general learning problem, the performance can be improved substantially, and the final integrated approach leads to a three-fold improvement in cumulative P&L compared to the original agent. Furthermore, our methodology outperforms the highest benchmark policy by around 50% while maintaining efficient computational performance.