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Investment in Stochastic Electricity-Production Facilities

In: Handbook of Risk Management in Energy Production and Trading

Author

Listed:
  • Luis Baringo

    (University of Castilla-La Mancha)

  • Antonio J. Conejo

    (University of Castilla-La Mancha)

Abstract

This chapter considers a profit-oriented private investor interested in building stochastic electricity-production facilities, such as solar and wind power plants. This investor sells its production in a competitive pool-based electricity market and faces uncertainties related to demand growth, its production level, and its investment cost. Adopting a multistage approach, a stochastic complementarity model is formulated to determine the optimal capacity to be built by the investor to maximize its expected profit while minimizing its profit volatility. An example considering a wind power investor is presented to illustrate the working of the proposed model.

Suggested Citation

  • Luis Baringo & Antonio J. Conejo, 2013. "Investment in Stochastic Electricity-Production Facilities," International Series in Operations Research & Management Science, in: Raimund M. Kovacevic & Georg Ch. Pflug & Maria Teresa Vespucci (ed.), Handbook of Risk Management in Energy Production and Trading, edition 127, chapter 0, pages 353-383, Springer.
    • Handle: RePEc:spr:isochp:978-1-4614-9035-7_14
    DOI: 10.1007/978-1-4614-9035-7_14
    as

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