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A Stochastic Programming Approach to Power Portfolio Optimization

Author

Listed:
  • Suvrajeet Sen

    (SIE Department, MORE Institute, University of Arizona, Tucson, Arizona 85721)

  • Lihua Yu

    (SIE Department, MORE Institute, University of Arizona, Tucson, Arizona 85721)

  • Talat Genc

    (SIE Department, MORE Institute, University of Arizona, Tucson, Arizona 85721)

Abstract

We consider a power portfolio optimization model that is intended as a decision aid for scheduling and hedging (DASH) in the wholesale power market. Our multiscale model integrates the unit commitment model with financial decision making by including the forwards and spot market activity within the scheduling decision model. The methodology is based on a multiscale stochastic programming model that selects portfolio positions that perform well on a variety of scenarios generated through statistical modeling and optimization. When compared with several commonly used fixed-mix policies, our experiments demonstrate that the DASH model provides significant advantages.

Suggested Citation

  • Suvrajeet Sen & Lihua Yu & Talat Genc, 2006. "A Stochastic Programming Approach to Power Portfolio Optimization," Operations Research, INFORMS, vol. 54(1), pages 55-72, February.
    • Handle: RePEc:inm:oropre:v:54:y:2006:i:1:p:55-72
    DOI: 10.1287/opre.1050.0264
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    References listed on IDEAS

    as
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