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Handling the risk dimensions of wind energy generation

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  • Thomaidis, Nikolaos S.
  • Christodoulou, Theodoros
  • Santos-Alamillos, Francisco J.

Abstract

In this paper, we explore two strategies for reducing the cash flow uncertainty of wind energy producers ascribed to variable weather conditions. The first strategy is based on the idea of aggregating the output of geographically-dispersed generating units. The second strategy employs financial instruments that compensate producers for unanticipated declines in the power delivery. Using a blend of advanced weather modeling, time series analysis, simulation and optimization techniques, we empirically access the ability of the two risk management approaches to control volumetric risk in Spain. With the aid of factor analysis techniques, we proceed with the decomposition of the remaining risk levels and assess the exposure of each strategy’s revenue to systematic risk factors. Motivated by the results of this analysis, we propose new financial contracts and mixed-style strategies that are better suited to the risk position of each market player.

Suggested Citation

  • Thomaidis, Nikolaos S. & Christodoulou, Theodoros & Santos-Alamillos, Francisco J., 2023. "Handling the risk dimensions of wind energy generation," Applied Energy, Elsevier, vol. 339(C).
    • Handle: RePEc:eee:appene:v:339:y:2023:i:c:s0306261923002891
    DOI: 10.1016/j.apenergy.2023.120925
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    1. Theodoros Christodoulou & Nikolaos S. Thomaidis & Stergios Kartsios & Ioannis Pytharoulis, 2024. "Managing the Intermittency of Wind Energy Generation in Greece," Energies, MDPI, vol. 17(4), pages 1-32, February.
    2. Yuji Yamada & Takuji Matsumoto, 2023. "Construction of Mixed Derivatives Strategy for Wind Power Producers," Energies, MDPI, vol. 16(9), pages 1-26, April.

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