Mean-risk optimization models for electricity portfolio management

Abstract

Abstract-The possibility of controlling risk in stochastic power optimization by incorporating special risk functionals, socalled polyhedral risk measures, into the objective is demonstrated. We present an exemplary optimization model for meanrisk optimization of an electricity portfolios of a price-taking retailer. Stochasticity enters the model via uncertain electricity demand, heat demand, spot prices, and future prices. The objective is to maximize the expected overall revenue and, simultaneously, to minimize risk in terms of multiperiod risk measures, i.e., risk measures that take into account intermediate cash values in order to avoid liquidity problems at any time. We compare the effect of different multiperiod polyhedral risk measures that had been suggested in our earlier work.

Multistage stochastic portfolio optimisation in deregulated electricity markets using linear decision rules

“…One of the earliest contributions is due to Fleten et al [14], who suggest that production planning and financial risk management should be integrated in order to maximise expected profit at some acceptable level of risk. Multistage stochastic models for the electricity procurement of utility companies have been proposed in [13,18,22,25,35]. These papers consider mean-risk optimisation models (see, e.g., [38,Chapter 6]), which encompass several ways of procuring electric energy (for instance, via bilateral volume contracts, power derivative contracts, spot contracts and self-production) to satisfy the customers' electricity demand.…”

“…These papers consider mean-risk optimisation models (see, e.g., [38,Chapter 6]), which encompass several ways of procuring electric energy (for instance, via bilateral volume contracts, power derivative contracts, spot contracts and self-production) to satisfy the customers' electricity demand. The trading of futures at intermediate periods is envisaged in [13,25,35], whereas the acquisition of energy derivatives and the signing of bilateral contracts occur at the beginning of the planning horizon only in [18,22]. To improve model tractability, electricity demand is assumed to be deterministic in [13].…”

“…The trading of futures at intermediate periods is envisaged in [13,25,35], whereas the acquisition of energy derivatives and the signing of bilateral contracts occur at the beginning of the planning horizon only in [18,22]. To improve model tractability, electricity demand is assumed to be deterministic in [13]. The model presented in [35] imposes limits on the maximum loss per period to hedge against risk, while all other models use some variant of the Conditional Value-at-Risk to quantify risk.…”

Optimal operation of combined heat and power under uncertainty and risk aversion

“…In a similar vein, [25] approach the problem of a large electricity consumer facing uncertainty in electricity prices with the possibility of meeting its (deterministic) demand using spot purchases, supply contracts, and self-generation with a deterministic cost over a six-month horizon by implementing a multi-stage stochastic programming framework. Introducing CHP in a stochastic programming model, [26] take the perspective of a risk-averse utility that must meet the stochastic electricity and heating demands of its customers via cogeneration, electricity spot purchases, and electricity futures purchases. [27] tackle the day-ahead CHP scheduling problem of a risk-averse consumer facing uncertainty in electricity prices and demand with a deterministic self-generation cost.…”

“…Similar to [24], [25], [26], and [27], we examine the stochastic energy-sourcing problem faced by a large consumer, but we investigate how both the consumer's electricity and heat loads are met as well as the possibility of using CHP in addition to a microturbine without heat recovery. Furthermore, we assume that both electricity and gas spot prices are uncertain and futures prices are marked-to-market in every period, which is not the case in the literature that we have surveyed.…”