Portfolio Optimization in Electricity Market Using a Novel Risk Based Decision Making Approach

Abstract

Abstract. This paper provides generation companies (GENCOs) with a novel decisionmaking tool that accounts for both long-term and short-term risk aversion preferences and devises optimal strategies to participate in energy and ancillary services markets and forward contracts, in which the possibility of involvement in arbitrage opportunities is also considered. Because of the imprecise nature of the decision maker's judgment, appropriate modelling of risk aversion attitude of the GENCO is another challenge. This paper uses fuzzy satisfaction theory to express decision maker's attitude toward risk. Conditional Value at Risk methodology (CVaR) is utilized as the measure of risk and uncertainty sources include prices for the day-ahead energy market, Automatic Generation Control (AGC), and reserve markets. By applying the proposed method, not only trading loss over the whole scheduling horizon can be controlled, but also the amount of imposed loss during every time period can be reduced. An illustrative case study is provided for further analysis.

Strategic Bidding in the Presence of Renewable Sources for Optimizing the Profit of the Power Suppliers

“…Given symmetrical and unsymmetrical data, the practical bidding strategy is presented in a Day-Ahead Market (DAM) [15]. A new riskbased decision-making method is introduced to achieve optimal GENCO bidding strategies accounting for short-term and long-term risk aversion preferences [16]. The bidding strategy issue of power providers considering the ramp rates of the generator in a DAM is projected in [17].…”

A novel exact solution algorithm for a robust product portfolio problem under return uncertainty

“…In companies that offer multiple products, each product must have a well-defined place in the company's business strategy. Also, investors often show great interest in the companies' choice of product portfolio, that is, the set of products that the management choose to produce and how they are fitted together to ensure optimal returns over a given time period [1,2]. Each product has its own characteristics, demand, and profitability, and requires its own company resources and raw materials.…”