Spinning Reserve Pricing via Security Instruments in Competitive Electricity Markets

Gharaveisi, Ali Akbar; Rashidinejad, Masoud; Lee, K.Y.

doi:10.1109/pes.2007.386285

Cited by 2 publications

(1 citation statement)

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“…Hjalmarsson [5] discusses the use of the Black and Scholes model for electricity option pricing. In [6] and [7], the option pricing is used to procure spinning reserve. Rashidinejad et al [8] discuss a day-ahead market associated with joint energy and ancillary services dispatch is used as a benchmark for contingency reserves option pricing and proposes a new methodology aimed to derive the option pricing for contingency reserves as a major part of ancillary services in restructured power systems.…”

Section: Introductionmentioning

confidence: 99%

Energy Reserve Trade Optimization for Wind Generators Using Black and Scholes Options in Small-Size Power Systems

Ghaffari

Venkatesh

2015

Can. J. Electr. Comput. Eng.

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Tremendous attention has been paid to wind energy. This renewable source of clean energy has become very appealing to investors, engineers, and environmentalists. From the power system operations perspective, the uncertain nature of wind power poses serious challenges. To reduce the effect of wind power uncertainty, a reserve procurement methodology using financial derivative such as "Options" is very promising. This paper proposes a new optimization model to procure secondary reserves to overcome wind power uncertainty by using Black and Scholes financial options while estimating short-term wind energy forecast errors by using the Gaussian distribution function. The proposed model integrates power system security constraints. At the optimal solution, the lambda multiplier associated with real power balance equations provides option premiums and strike prices.Résumé-L'énergie éolienne suscite de plus en plus d'intérêts. En effet, cette source d'énergie renouvelable et propre suscite l'intérêt des investisseurs, des ingénieurs, et des écologistes. Par contre, du point de vue de exploitation de cette ressource, la nature incertaine de l'énergie éolienne pose de sérieux défis. Pour réduire l'effet d'incertitude concernant l'énergie éolienne, une méthodologie de réserve de l'approvisionnement utilisant des dérivées financières telles que "Options" est très prometteuse. Cet article propose un nouveau modèle d'optimisation fournissant des réserves secondaires afin de surmonter l'incertitude de l'énergie éolienne. Le modèle utilise des options financières de "Black et Scholes" tout en estimant les erreurs de prévision de l'énergie éolienne à court terme à l'aide de la fonction de distribution gaussienne. Le modèle proposé intègre les contraintes de sécurité du système d'alimentation. Comme solution optimale, le multiplicateur de lambda associe à la puissance réelle des équations de bilan fourni des options de prime et des prix intéressants.Index Terms-Binomial tree, Black and Scholes model, call option, Gaussian distribution, independent system operator (ISO), market spot price, market volatility, network constraints, put option, spinning reserve, strike price, wind energy error. NOMENCLATUREStock Market t Time in future, current time t = 0 hours. TH Time period for historical data. λs Current value of stock price. σ s Volatility per hour of financial instrument. rs Interest rate. Cs, Ps Call and put option premiums for stock at time t. Ks Strike price of stock option at time t.

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Section: Introductionmentioning

confidence: 99%