Risk management and optimal bidding for a wind power producer
Dates
Year
2010
Citation
Botterud, A., Wang, J., Bessa, R.J., Keko, H., and Miranda, V., 2010, Risk management and optimal bidding for a wind power producer: Power and Energy Society General Meeting, 2010 IEEE, p. 1-8.
Summary
This paper discusses risk management, contracting, and bidding for a wind power producer. A majority of the wind power in the United States is sold on long-term power purchase agreements, which hedge the wind power producer against future price risks. However, a significant amount is sold as merchant power and therefore is exposed to fluctuations in future electricity prices (day-ahead and real-time) and potential imbalance penalties. Wind power forecasting can serve as a tool to increase the profit and reduce the risk from participating in the wholesale electricity market. We propose a methodology to derive optimal day-ahead bids for a wind power producer under uncertainty in realized wind power and market prices. We also present [...]
Summary
This paper discusses risk management, contracting, and bidding for a wind power producer. A majority of the wind power in the United States is sold on long-term power purchase agreements, which hedge the wind power producer against future price risks. However, a significant amount is sold as merchant power and therefore is exposed to fluctuations in future electricity prices (day-ahead and real-time) and potential imbalance penalties. Wind power forecasting can serve as a tool to increase the profit and reduce the risk from participating in the wholesale electricity market. We propose a methodology to derive optimal day-ahead bids for a wind power producer under uncertainty in realized wind power and market prices. We also present an initial illustrative case study from a hypothetical wind site in the United States, where we compare the results of different day-ahead bidding strategies. The results show that the optimal day-ahead bid is highly dependent on the expected day-ahead and real-time prices, and also on the risk preferences of the wind power producer. A deviation penalty between day-ahead bid and real-time delivery tends to drive the bids closer to the expected generation for the next day.
