Risk management and optimal bidding for a wind power producer

Use of wind power forecasting in operational decisions.

“…Bourry et al [20] presented an alternative strategy based on portfolio theory that balances between the expected value and the risk of the balancing costs distribution. Botterud et al [24] present a methodology to derive optimal DA bids for a wind power producer under uncertainty and compare the results of different bidding strategies (e.g., maximizing the utility). The authors discussed how the optimal bids depend on the electricity market design.…”

“…The initial ideas for the wind power trading model were first presented in [24]. Since then, we have extended the model and analysis in multiple directions.…”

“…Experience shows that negative RT prices may occur quite frequently in markets with LMPs and a high penetration of wind power. 23 The model allows for three different assumptions of how the wind power is controlled when RT prices 24 are low and negative:…”

“…The negative prices in the RT market may to some extent be linked to the wind power benefits discussed in the footnote above. 24 New wind power plants can easily be controlled to reduce or shut down their generation, and this flexibility will add to their revenue stream. Older wind turbines may not have this flexibility.…”

Development and testing of improved statistical wind power forecasting methods.

“…It is possible to extract the optimal quantile from the pdf for each hour and, consequently, the "optimal" decision under the expected value paradigm. Botterud et al [21] presented an approach based on maximizing the utility; for this approach, the pdf enables the production of a probability mass function (pmf) that can be used to compute the expected utility. Bourry et al [22] described an approach based on portfolio theory where a trade-off between expected income and risk (described by the conditional value-at-risk) is evaluated to find the "optimal" bid.…”