Abstract
AbstractCompetition in power markets has exposed the participating companies to physical and financial uncertainties. A random outage after acceptance of bids by the ISO forces a generator to buy power from the real‐time hourly spot market and sell to the ISO at the set day‐ahead market‐clearing price, incurring losses if the real‐time hourly spot market is expensive. This paper assesses the financial risk of the generators using risk profiles and VaRs. A risk minimization module is developed which derives optimum bidding strategies of the generator company such that the estimated total earning is maximized keeping the Value at Risk (VaR) below a tolerable limit. Copyright © 2007 John Wiley & Sons, Ltd.
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