Abstract
AbstractThe power producers in Indian electricity market face risks pertaining to real time frequency deviation and spot price volatility. An increase in real time demand lowers the system frequency. This forces the producers to draw unscheduled interchange (UI) power by paying a penalty, known as availability based tariff (ABT). The paper proposes a novel framework for optimal portfolio strategy selection of a power producer using uncertainty of frequency deviation and spot electricity market. Mean variance portfolio theory is used to model the stochastic optimization problem. In Stage 1, the operational ABT uncertainty structure is modeled and optimization is performed to determine optimal portfolio allocation, considering spot market and bilateral contract as available trading options. In stage 2, optimal involvement of options to hedge the cost side risk of unscheduled power interchange (UPI) is studied. Spot price volatility is introduced during hedging analysis and mean absolute percentage error (MAPE) technique is used to forecast the spot price range. A stochastic pseudo inspired particle swarm optimization (PIPSO) technique is proposed for enhanced profit-risk tradeoff. The model reflects that, spot and option trading could offer high risk protection vis-à-vis bilateral contract and can predominantly help in managing frequency penalty risk.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call