Equilibrium Simulation of Power Market with Wind Power Based on CVaR Approach

Abstract

High wind power penetration in power systems will significantly increase risks faced by the conventional generators in the deregulated electricity markets. This will further affect these generators’ risk preferences and strategic behaviors. Based on conditional value at risk (CVaR), an equilibrium model of electricity market with wind power is developed taking into account the conventional generators’ risk preferences. The model is performed by Monte Carlo simulation and nonlinear complementary method. The impacts of wind power volatility and generators’ risk preferences on generators’ strategy behaviors and equilibrium results are analyzed and the efficient frontier of generators’ expected profit – CVaR is provided. The simulation results show that, the equilibrium market price will increase with the increase of wind power uncertainty; the increase of conventional generators’ risk aversion will also lead to an increase in the expected market price; if generators collude with others, they will be more conservative.