Optimization of Electricity Retailer’s Contract Portfolio Subject to Risk Preferences
Date
2010
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Institute of Electrical and Electronics Engineers (IEEE)
Abstract
When an electricity retailer faces volume risk in
meeting load and spot price risk in purchasing from the wholesale
market, conventional risk management optimization methods can
be quite inefficient. For the management of an electricity contract
portfolio in this context, we develop a multistage stochastic optimization
approach which accounts for the uncertainties of both
electricity prices and loads, and which permits the specification of
conditional-value-at-risk requirements to optimize hedging across
intermediate stages in the planning horizons. Our experimental
results, based on real data from Nordpool, suggest that the modeling
of price and load correlations is particularly important. The
sensitivity analysis is extended to characterize the behavior of
retailers with different risk attitudes. Thus, we observe that a risk
neutral retailer is more susceptible to price-related than load-related
uncertainties in terms of the expected cost of satisfying the
load, and that a risk averse retailer is especially sensitive to the
drivers of the forward risk premium.
Description
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Keywords
risk management
Citation
J. Kettunen, A. Salo, and D.W. Bunn. Optimization of Electricity Retailer’s Contract Portfolio Subject to Risk Preferences. IEEE Transactions on Power Systems, 25(1):117–128, 2010.