Assessment of Price Risk of Power under Indian Electricity Market

Chawda, Sandeep; Deshmukh, Shailaja

doi:10.5120/9590-4207

Cited by 1 publication

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References 5 publications

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“…Diversification means to trade energy through different trading approaches. A combination of these trading approaches is defined as a portfolio and corresponding risk-control methodology is named as portfolio optimization [3] [13].…”

Section: Risk Managementmentioning

confidence: 99%

Risk management in electricity market by portfolio optimization

Shinde

Deshmukh

2014

2014 Annual IEEE India Conference (INDICON)

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Though electricity is getting traded as a commodity, the price of power is more volatile than any other commodity. The price of power is controlled by many unseen and random market driven factors, such as load-demand variation, attitude of market players, fuel price variation, availability of resources etc. Due to this, market participants get exposed to price-risk and their profitability gets affected. Hence since more than a decade, risk management has become an essential task for electrify market participants. In case of conventional generation, oil, coals are the major fuels. The variability of fuel price affects the price of power. In this paper, the effect of variability of fuel price on risk is analyzed.The objective of this paper is to minimize the risk associated with fuel -price variation using portfolio optimization method. This paper explains the concept of efficient frontier, a key feature of portfolio theory and its application in fuel -price risk minimization. The results are analyzed for different combinations of fuels such as coal and oil considering two approaches: Monthly Efficient Frontier and Daily Efficient Frontier. The work suggests the approach of using daily price variation to obtain optimum portfolio.

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Section: Risk Managementmentioning

confidence: 99%