Free contract environment for big electricity consumer in Brazil considering correlated scenarios of energy, power demand and spot prices

Abstract

In Brazil, big consumers can choose the free market to purchase their energy. The main advantage is the possibility of negotiating a lower price and the main risk is the difference between the energy contracted and consumed in each month, which should be settled by the spot price.This paper proposes to optimize the parameters of a contract by a statistical and optimization model. In the statistical part, the parameters for energy and peak demand time series are estimated in a correlated way with the simulated scenarios of spot price, which is an input in the proposed methodology.In the optimization part, a stochastic model is applied using a convex combination of the Expected Value and Conditional Value-at-Risk to find the optimum contract parameters, which are the energy contracted, the upper and lower bounds of the contract and peak demand contracted. To summarize, the main contribution of the proposed approach is to provide a methodology for big electricity consumers in the free energy market in Brazil, which considers a statistical model, that correlates and simulates scenarios of energy and peak demand with the spot price scenarios, and optimizes it based on a stochastic optimization model combining the Expected Value and Conditional Value at Risk as risk metrics.The results indicate that the methodology can be a powerful tool for consumers in the free market and, due to the nature of the model, it can be generalized for different energy markets.