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Risk Constrained Trading Strategies for Stochastic Generation with a Single-Price Balancing Market

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  • Jethro Browell

Abstract

Due to the limited predictability of wind power and other stochastic generation, trading this energy in competitive electricity markets is challenging. This paper derives revenue-maximising and risk-constrained strategies for stochastic generators participating in electricity markets with a single-price balancing mechanism. Starting from the optimal---and impractical---strategy of offering zero or nominal power, which exposes the participant to potentially large imbalance costs, we develop a number of strategies that control risk by hedging against penalising balancing prices in favour of rewarding ones. Trading strategies are formulated in a probabilistic framework in order to address asymmetry in balancing prices. The large-scale communication of system information characteristic of modern power systems is utilised to inputs for electricity price forecasts and probabilistic system length forecasts. A case study using data from the GB market in the UK is presented and the ability of the proposed strategies to increase revenue and reduce risk is demonstrated and analysed.

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  • Jethro Browell, 2017. "Risk Constrained Trading Strategies for Stochastic Generation with a Single-Price Balancing Market," Papers 1708.02625, arXiv.org.
    • Handle: RePEc:arx:papers:1708.02625
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    References listed on IDEAS

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