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Self-commitment of combined cycle units under electricity price uncertainty

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  • PAPAVASILIOU, Anthony

    (Université catholique de Louvain, CORE, Belgium)

  • HE, Yi

    (Pacific Gas and Electric Co.)

  • SVOBODA, Alva

    (Pacific Gas and Electric, Co.)

Abstract

Day-ahead energy market clearing relies on a deterministic equivalent model with a limited time horizon, which may lead to inefficient scheduling of generating units from the point of view of generators. For this reason, generators may wish to forgo the profit hedging offered by day-ahead electricity markets and assume the risk of self-committing their units with the hope of securing greater profits. This phenomenon may undermine the depth of the day-ahead market, especially in conditions of high price volatility due to deep renewable energy integration. In this paper we investigate the influence of risk aversion and price volatility on the decision of generators to self-commit units. We present a stochastic programming model for self-committing combined cycle units under price uncertainty with a conditional value at risk risk criterion. We use Bender’s decomposition to solve the problem and present results on a case study to draw conclusions.

Suggested Citation

  • PAPAVASILIOU, Anthony & HE, Yi & SVOBODA, Alva, 2013. "Self-commitment of combined cycle units under electricity price uncertainty," LIDAM Discussion Papers CORE 2013051, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2013051
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    18. MADANI, Mehdi & VAN VYVE, Mathieu, 2013. "A new formulation of the European day-ahead electricity market problem and its algorithmic consequences," LIDAM Discussion Papers CORE 2013074, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    19. GRIGIS DE STEFANO, Federico, 2014. "Strategic stability of equilibria: the missing paragraph," LIDAM Discussion Papers CORE 2014015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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